How long will bankruptcy stop a foreclosure?

Will Bankruptcy Stop a Foreclosure? For How Long?

Yes, bankruptcy will stop foreclosure, but not indefinitely. Even if your home is scheduled to be sold at foreclosure tomorrow, filing bankruptcy today will invoke an injunction called the automatic stay which will temporarily stop all creditor collection activity, including lawsuits, phone calls and foreclosures.

If you have kids or have ever played a game of ” tag” the automatic stay operates very much like freeze tag. The filing of a bankruptcy case “freezes” the foreclosure, giving you time to catch your breath. How long is the foreclosure process stopped in bankruptcy?

Bankruptcy will not stop foreclosure forever. In chapter 7 bankruptcy, the automatic stay will last as long as the case is open, usually about three months. However, if you are behind on mortgage payments, your lender will ask the Bankruptcy Court to lift the stay and allow the foreclosure to proceed. Lenders are usually successful in having the automatic stay lifted because filing for bankruptcy does not relieve the obligation to make mortgage payments if you wish to keep your home. In this scenario, chapter 7 bankruptcy would disrupt a foreclosure for a few months depending on how quickly your lender asks to have the stay lifted and state foreclosure law.

Filing for chapter 13 bankruptcy will stop a pending foreclosure action and may also provide for a longer term solution for those having trouble getting caught up on their mortgage. By definition, if you’re facing foreclosure, you’ve fallen behind on mortgage payments. The trouble for many people is that their lender demands full repayment of arrearages plus late fees before agreeing to reinstate the loan. Chapter 13 bankruptcy forces your lender to accept the payments you’ve missed in small installments over a 3-5 year period. The practical result is that you’ll owe your normal mortgage payment plus a little bit of the past due amount on top. If you can afford this, your lender may will be stopped from foreclosing for the duration of your chapter 13 plan. As an added benefit, chapter 13 bankruptcy may also allow for second and third mortgages to be modified.

So remember, if you can afford your normal monthly mortgage payments, chapter 13 bankruptcy may be able to prevent foreclosure for quite awhile if not forever. If you’re not in a position to make your normal monthly mortgage payments, filing bankruptcy will only temporarily stop the foreclosure process. If you have questions, consult an attorney.