Can Bankruptcy Halt Foreclosure?
The question of whether filing for bankruptcy can halt a foreclosure risk is a complex query. The answer to this question largely depends upon which kind of bankruptcy is being filed and how far along a homeowner has progressed along the path to foreclosure. For some homeowners, filing for bankruptcy is an effective way to halt the foreclosure process and to catch up on their outstanding payments. For others, filing for bankruptcy can provide many benefits but halting the foreclosure process isn’t one of them. It is for this reason that it is important to speak with an attorney about your rights and options before making any assumptions about whether filing for bankruptcy will help you to save your home.
The Automatic Stay
When someone files for bankruptcy, they immediately benefit from protections afforded by the automatic stay. As a foreclosure lawyer – including those who practice at The Law Offices of Ronald I. Chorches – can explain in greater detail, the automatic stay halts almost all collection actions pending against the filer and keeps creditors from filing new collection actions for the duration of a bankruptcy case. As a result, filing for bankruptcy can, in almost all situations, keep a lender who has yet to formally foreclose against a homeowner from initiating such action while the filer’s bankruptcy case remains pending. The automatic stay protections apply regardless of whether filers opt for Chapter 7 bankruptcy relief or Chapter 13 bankruptcy relief.
Chapter 7 Bankruptcy
Due to the advantages of the automatic stay, filing for Chapter 7 bankruptcy can delay the foreclosure process by a few weeks or a few months until a filer’s case is resolved. For those who just need a little bit of time to come into money that will allow them to catch up on their overdue payments, filing for Chapter 7 bankruptcy may be an effective safeguard against foreclosure. However, for most others, filing for this Chapter of bankruptcy only delays a lender’s foreclosure action and provides virtually no way to directly halt such actions outright moving forward.
Chapter 13 Bankruptcy
Filing for Chapter 13 bankruptcy can provide an effective tool to halt a foreclosure. As the repayment plan for a Chapter 13 bankruptcy petition is 3-5 years, as long as a filer makes good on their repayment schedule, the benefits of the automatic stay will remain in place for the duration of that repayment. The length of repayment for Chapter 13 cases offers homeowners ample time to catch up on overdue payments.