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Can filing for bankruptcy stop a foreclosure?

On Behalf of | Dec 12, 2023 | Chapter 7 Bankruptcy |

When your lender files for foreclosure, you may believe that you’re going to lose your home, but you’re seeking anything you can do to prevent it. This could be because the home is very important for you and your family, so it’s your main priority. It could also be because you think your financial troubles are temporary and you want to keep the house until you get things sorted out.

One option that you may consider is filing for bankruptcy. This creates an injunction on your foreclosure case, telling the lender that they can’t proceed with reclaiming your property. This is also known as an automatic stay. Your bankruptcy case has to conclude first, so the injunction is put in place to prevent the foreclosure.

The automatic stay is limited

But don’t assume that this means that all you need to do to avoid foreclosure is file for bankruptcy. The automatic stay only lasts until that bankruptcy case is done. It is then removed, at which point the foreclosure may resume.

As you go through bankruptcy, then, it can be wise to focus on your main goal of keeping your home. Maybe you could use Chapter 7 bankruptcy to liquidate some non-exempt assets, eliminate debts and get current on your mortgage payments again. Or maybe you could use Chapter 13 bankruptcy to create a repayment plan for your other debts, making your home affordable once again.

You certainly do have options, but it’s just important to understand exactly how they’re going to work and what legal steps you need to take to focus on a positive financial future.