Can Filing a Chapter 7 or 13 Bankruptcy Stop My Foreclosure?

In a word, yes.  However, it may not stop it forever.  The answer will largely depend on the Chapter of the Bankruptcy Code under which your case is filed.  Chapter 7 and Chapter 13 approach the foreclosure differently:

Chapter 7:  If you file a straight Chapter 7, or liquidation, the immediate effect of the automatic stay will stop the lender from proceeding with the foreclosure.  However, since they are secured creditors, having a mortgage or deed of trust secured by the real estate (your house), they will most likely file a Motion to Lift the Automatic Stay and ultimately get the foreclosure back on track and take the house.  The effect of the Chapter 7 filing will, however, grant you a little more time in your home before the Automatic Stay is lifted.

Chapter 13:  If you file a Chapter 13, as part of the case you will submit a repayment plan.  Commonly, you will be able to add the delinquent mortgage payments to the plan and pay them off over three to five years, depending on the length of your plan.  Of course, as part of your plan, you will be required to remain current on the monthly payments, in addition to the back payments you have included in the plan.  This can be a tremendous benefit, especially if you have some equity in your property or if your financial problems were caused by a temporary condition, such as a job lay-off, where you are now again gainfully employed.  If you have a second or third mortgage on your house, and the value of the house is equal to or less than the amount of the first mortgage, under Chapter 13, you may be able to strip off the second and third mortgages from the property and have them classified as unsecured debt, which then becomes a very low priority for repayment.

Of course, each situation is unique.  The state of the current real estate market will play a large role in determining whether or not it ultimately makes sense to try and keep your house.  If you would like to discuss your particular situation, feel free to give me a call at 719 302-4252 or send a fax to 719 466-2182 or an e-mail to Info@SpringsBKLaw.com.  I’ll let you know what I think and there will be no charge for the consultation.

We are a debt relief agency. We help people file for relief under the Bankruptcy Code.