The short answer is yes, filing for bankruptcy will stop foreclosure. However, it is only a short-term temporary solution. Even if a residential home has been scheduled for a foreclosure sale the next day, filing for bankruptcy beforehand encourages the judge to issue an injunction, referred to as an automatic stay, that temporarily stops every creditor’s collection abilities including foreclosures, phone calls and lawsuits.
A Temporary Chapter 7 Fix
Filing for bankruptcy does not have the ability to stop the foreclosure process forever. As part of a Chapter 7 bankruptcy, the court ordered automatic stay remains in place while the case is open and active, which usually takes about 90 days. Although, if the homeowner is behind on any mortgage payment, the financial lending institution will often ask for a lift of the automatic stay through the bankruptcy court, to allow the foreclosure to continue.
Typically, a mortgage lender will have more success in lifting the automatic stay, because simply filing for bankruptcy does not in any way release the homeowner from his or her obligation to repay the note, should they desire to keep the home. In a Chapter 7 bankruptcy, the process only disrupts the home foreclosure for a couple of months. The time limit of the stay is often reflected by the lender’s ability to get to court and ask for the automatic stay to be lifted, or the need to follow any foreclosure laws in that specific state.
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A Foreclosure with Chapter 13 Bankruptcy
When a homeowner files Chapter 13 bankruptcy, the process will automatically stop any pending foreclosure action. Additionally, it might possibly provide a longer-lasting solution than in Chapter 7, for individuals that are struggling to catch up on their mortgage payments. If an individual is facing foreclosure, and has fallen behind on their monthly mortgage payments, the lender often demands that a full repayment of all monies in arrears be made in addition to the associated late fees, before there is a reinstatement of the loan.
Chapter 13 bankruptcy sometimes serves as the best solution between the lender and the homeowner. It will automatically force the mortgage lender to accept any missed payments in smaller installments. This process can last between 3 to 5 years. In the end, the homeowner will make a traditional mortgage payment along with a small portion of a past due payment at the same time. With an attorney’s help, the homeowner can develop an affordable payment plan to avoid foreclosure for the entire duration of the plan filed under Chapter 13.
Filing for Chapter 13 bankruptcy works as a long-term solution for preventing foreclosure on the house for many years. It works as the ideal solution for any homeowner that now has the ability to make normal monthly payments on the mortgage, plus a small additional payment to catch up on all arrears.
Hiring an Attorney
If you find yourself facing past due mortgage notices or even foreclosure, your fist step should be to schedule a consultation with one of our bankruptcy attorneys today to get a clearer understanding of the legal options which apply to your specific situation. Generally speaking, the US bankruptcy codes offer protection to debtors for these situations, and if properly handled, the court will monitor the entire process from beginning to end.
As a result, it is possible to stop your mortgage loan lender from proceeding with filing or completing a foreclosure during the process, giving you the opportunity to satisfy your obligations under the protection of the courts.