Why Bankruptcy Stops Foreclosure

Buchalter & Pelphrey Attorneys At Law

If you’re facing foreclosure or are already involved in proceedings, chances are you want to stop this process before your lender takes your home.

You may have heard of other ways to stop foreclosure, but did you know that filing for bankruptcy can provide you with temporary relief? It can! Depending on the type of bankruptcy you use, you can also develop a plan to pay back your mortgage arrears over time, allowing you to get current on your mortgage after experiencing financial hardship.

Bankruptcy & the Automatic Stay

Whether you file for Chapter 7 or Chapter 13 bankruptcy, the court will order an automatic stay. The automatic stay is a fundamental debtor protection that shields the bankruptcy filer from their creditors’ collection actions. In other words, creditors must stop all activities intended to seek repayment for debts for as long as the bankruptcy case remains open.

Fortunately for those behind on their mortgages, the automatic stay includes protection from mortgage lenders.

Here are two important takeaways:

  • If you file for bankruptcy after receiving a notice that your lender intends to foreclose, the automatic stay prevents your lender from proceeding with foreclosure.
  • If you are currently involved in foreclosure proceedings, the automatic stay means these must cease for as long as it takes your bankruptcy case to conclude, or until the automatic stay is lifted.

Chapter 13 Can Help You Protect Your Home for Longer

As we previously mentioned, the automatic stay isn’t permanent. It only persists for as long as your bankruptcy case lasts. This means that if you still owe your mortgage lender arrears after Chapter 7, it can move forward with foreclosure. In some cases, the automatic stay can be terminated prior to the completion of your bankruptcy. For the purposes of this article, we will not examine those situations.

Things are a little different in Chapter 13, however. This type of bankruptcy can reorganize your debt into more manageable payments plans. These plans last three to five years, and as long as a bankruptcy filer adheres to its terms, they can either pay off their debt or receive a discharge of remaining debt at the end of the plan.

Chapter 13, therefore, is useful for reorganizing mortgage arrears and paying them off over time, which can help you keep your home for much longer than the automatic stay permits. When you follow your Chapter 13 plan, that can mean keeping your home indefinitely!

Do You Need Help with Bankruptcy?

If you are experiencing a financial challenge and want to explore your options in bankruptcy, our experienced advocates at Buchalter & Pelphrey Attorneys At Law can assist you. We’ve helped many people experiencing problems with debt overcome financial obstacles by developing creative legal solutions built just for them.

If you’d like to learn more about how we may be able to help you, contact Buchalter & Pelphrey Attorneys At Law online now.

Categories: 
Related Posts
  • Is Your Side Hustle at Risk? Bankruptcy Implications for Gig Workers and Freelancers. Read More
  • Bankruptcy and Digital Assets: What Happens to Your Cryptocurrency and NFTs? Read More
  • Bankruptcy After Natural Disasters: Unique Strategies for Financial Recovery Read More
/