Can Bankruptcy Stop Foreclosure?

If you’re behind on your mortgage and worried about losing your home, you’re not alone, and you may be wondering if bankruptcy can help stop a foreclosure. The answer is: yes, in many cases, bankruptcy can temporarily or permanently halt the foreclosure process, but it depends on your situation and the type of bankruptcy you file.

Let’s take a closer look at how it works.

Understanding the Automatic Stay

When you file for bankruptcy, something called the automatic stay goes into effect immediately. This is a court order that stops most collection actions, including:

• Foreclosure proceedings
• Evictions
• Wage garnishments
• Harassing phone calls from creditors

If your home is scheduled for foreclosure, the automatic stay can put that process on hold, at least temporarily, while your bankruptcy case is reviewed.

How Chapter 13 Bankruptcy Can Help Save Your Home

Chapter 13 bankruptcy is designed for individuals who have a steady income but need time to catch up on past-due debts. It allows you to create a repayment plan (usually over 3 to 5 years) to pay off missed mortgage payments while staying current on new ones.

This type of bankruptcy is especially helpful for homeowners because:

• It can stop foreclosure and give you time to catch up.
• You can keep your home as long as you follow the repayment plan.
• You may also be able to eliminate or restructure other debts (like credit cards or medical bills), freeing up money for your mortgage.

What About Chapter 7 Bankruptcy?

Chapter 7 bankruptcy does not provide a repayment plan, it’s typically used to discharge unsecured debts like credit cards and medical bills. While it does trigger the automatic stay, the protection is often short-term if you’re behind on mortgage payments.

Unless you’re able to quickly catch up on missed payments, the lender may ask the court to lift the stay and proceed with foreclosure. Chapter 7 may delay foreclosure but usually won’t prevent it permanently.

However, it can still be helpful if your goal is to:

• Delay foreclosure while you make other arrangements
• Discharge debts and walk away without liability for a mortgage deficiency

Timing Matters

If foreclosure is close, it’s important to speak with an attorney quickly. Filing for bankruptcy even a day before a foreclosure sale can stop the process, but waiting too long can limit your options.

Talk to an Experienced Attorney

Bankruptcy is a powerful legal tool, but it’s not one-size-fits-all. The best way to know if it can help with foreclosure is to speak with an attorney who can look at your specific situation. Attorney Greg Kornegay has over 35 years of experience helping clients in Wilmington and Southeastern North Carolina understand their bankruptcy options and protect what matters most. If you’re facing foreclosure or struggling with debt, schedule a free consultation to learn what your next step could be.