The bankruptcy myth that you can no longer stop a foreclosure proceeding by filing for bankruptcy is simply no true! Both a Chapter 7 bankruptcy and a Chapter 13 bankruptcy will stop a foreclosure, but with different long term results.
When filing a Chapter 7 bankruptcy or a Chapter 13 bankruptcy you receive a stay of all collection action.
A foreclosure proceeding is a collection action.
Filing of a foreclosure proceeding or going forward with a foreclosure proceeding would violate the bankruptcy stay.
If a creditor wants to file a foreclosure or continue with a foreclosure, it must file a motion with the bankruptcy court to “lift” the stay.
Since we are discussing a foreclosure we are of course discussing a situation where you are behind on your house note.
A Chapter 7 bankruptcy will stop, but only delay a foreclosure since a the Chapter 7 bankruptcy will not allow you to get caught up on the arrearages on the house note.
However, the Chapter 7 bankruptcy will force the creditor to start over with the foreclosure, which in many instances will allow you to stay in your home for several extra months.
A Chapter 13 bankruptcy will allow you to set up a Plan that will require the creditor to begin accepting the monthly payments from you on the future amounts that you owe and at the same time allow you to catch up on the arrearages over a period of 3 to 5 years. As long as your Chapter 13 bankruptcy plan is confirmed and you make your payments, you will be able to keep your house.
The issues of bankruptcy as a way to avoid or delay a foreclosure are too complex for any more than a very general discussion here.
I provide a free 30 minute consultation to discuss whether bankruptcy is an option for you and also to assist you in deciding what type of bankruptcy is best for you.
Give me a call!