At McElroy & Associates, We Understand That Bad Things Can Happen To Good People

Get A Fresh Start Through Bankruptcy

Can bankruptcy stop foreclosure?

On Behalf of | Apr 26, 2024 | Chapter 13 Bankruptcy |

Generally speaking, a lender isn’t going to try to foreclose on a home if someone misses just a single mortgage payment. They technically could because the contract has been violated. But lenders will usually wait for a pattern of missed payments, which makes it more clear that the individual is not going to be able to get current on those payments again. Even after they start the foreclosure process, though, it can take months and there are many deadlines before someone would be removed from their home.

During this time, people will look into tactics to try to save the home and get current on those payments again. Will bankruptcy help? Does it stop foreclosure?

Bankruptcy can pause a foreclosure

When someone files for bankruptcy, an automatic stay is issued, and it applies to the foreclosure case and any other financial actions. While the person is going through bankruptcy, lenders and creditors may not continue to try to collect. They need to allow the bankruptcy case to conclude first, and the automatic stay will then be lifted.

After the stay is lifted, the bankruptcy could continue again if necessary. But what often happens is that people eliminate other debts or readjust their debt levels – such as creating a structured repayment plan under Chapter 13 bankruptcy – so that they can afford the mortgage again. In the end, they are able to keep their house.

This is one example of how bankruptcy can help and why you may want to consider it this year if you are facing substantial debt issues. There are always solutions to consider, and it’s important to know exactly what legal steps you should take at this time.