Can Filing Bankruptcy Stop Foreclosure?
Yes, bankruptcy absolutely stops foreclosure. The reason for that is when you file bankruptcy, what goes into effect immediately is called the automatic stay which is essentially a civil injunction against your lender and your foreclosure trustee from moving forward on any kind of collection action against you including the foreclosure of your home. There are some exceptions. If you’ve filed a bunch of bankruptcies previously, what’s called a serial filer. So you’ve filed 3 or 4 bankruptcies and have already gotten the automatic stay 3 or 4 times, you may not get the automatic stay to get into effect again, so be aware of that.
You can’t just keep doing it and doing it over and over but if you are filing bankruptcy for the first time or the second time, whether it’s a Chapter 7 or a Chapter 13, the minute you file bankruptcy even if it’s literally the day before the foreclosure sale, the foreclosing trustee has to stop and not foreclose on your property. Now, it may not be a permanent solution, it may not be the solution you are looking for forever but at least, it will buy you some time, it will get you some breathing room and it’ll get you an opportunity to figure out what you are going to do with the property or with the loan to try and get a permanent solution.
You may have the option of doing a loan modification if you haven’t tried that already, you may have the option of even repaying your mortgage arrears in a Chapter 13 plan. Alternatively, if you know you want to sell the property, there is some equity or you just want to stay as long as possible, you could consider doing a short sale which is selling the property on your own terms rather than having the bank dictate exactly when and how the property is sold. So yes, bankruptcy does stop foreclosure. If you are facing foreclosure and you think the bank is about to come and take the property, bankruptcy is definitely something to consider to help you get more time and to avoid the Sheriff physically removing you from the property which is never ideal.
So if you have any related questions or other questions, I’m happy to answer. Please subscribe to my channel and just leave your question in the comments section. I’ll try to make a video for you. Thanks for listening.