Can Bankruptcy save your Home?

Can filing bankruptcy stop a foreclosure sale and save your home?

Yes, it can stop the foreclosure process and allow you time to catch up on the past due amounts, provided that you act soon enough.

In today's economy, foreclosure sales are happening with increased frequency.  People are unable to maintain the payments on their mortgages, go into default, and when they are unable to work out payments arrangements with the bank, eventually they lose their homes.

Filing bankruptcy can stop a foreclosure sale.  The automatic stay will stop a pending foreclosure sale on your house (so long as you haven't had a prior bankruptcy case dismissed within the past 12 months).  The automatic stay remains in effect until your case is completed or dismissed.

The most typical Chapters to use to stop a foreclosure are Chapter 13, because you can propose a Plan of repayment that catches up (cures) on the past due amounts you owe to your mortgage or other lenders against your home, over a 36 to 60 month period, and Chapter 11, which also allows a longer term cure of arrearages.   This, of course, assumes that you are otherwise eligible to file Chapter 13 (or 11) and have the regular income sufficient to propose such a plan.    Plus, in some situations, you may actually be able to eliminate junior liens on your property entirely.  Visit my Chapter 13 page for more information.

Chapter 7 will temporarily stop a foreclosure sale, but usually just for a month or two.  Since no payments are made in a Chapter 7 case, you would need to negotiate with a foreclosing creditor outside the bankruptcy case to resolve your issues, if possible.

THE BIGGEST MISTAKE that people make is waiting until a few days prior to the foreclosure sale date to look into bankruptcy as an option.  At that point it will be difficult to find an attorney who can properly process everything in time to get your case filed on time, and you increase the likelihood of serious mistakes that way.