Chapter 13 Bankruptcy Can Stop Foreclosure

Foreclosure is a fear that many homeowners have. When a homeowner falls behind on their mortgage payments the lender has the legal right to foreclose on their home and auction it off to the highest bidder. This doesn’t happen immediately; you have to have missed several payments and there is a process that the lender must follow. One of the things that the lender must do is notify you if your home is being foreclosed on. If you receive one of these notices there is still something you can do to save your home: file for chapter 13 bankruptcy.

The word bankruptcy is scary and intimidating but it can save your home. Chapter 13 bankruptcy lets you keep your home in a few ways. The first is automatic stay. What this means is that when you file for bankruptcy your creditors are ordered to stop the collection process immediately, including the selling of your home. This typically lasts between three and four months, but depends on how long it takes for your filing to process.

There are two exceptions to automatic stay, however. You creditor can file a motion to lift the stay, in which they would have to receive permission from the bankruptcy court to sell your home despite you having filed for bankruptcy. If this happens, you will typically still have a month or two before being foreclosed on, but this varies on how quickly your creditor files the motion. The only other exception to automatic stay depends on if the foreclosure notice was filed already. Creditors must give you a notice period for foreclosure by law, but the time varies by state. If your notice period passes early on in your bankruptcy filing, then the creditor can file a motion to lift the stay as described above. Time matters, so if you have received a foreclosure notice you need to act quickly to prevent this from happening.

Chapter 13 bankruptcy stalls the foreclosure process when you file, but you still have to set up a payment plan. You are still required to make your current mortgage payments while making the payments to your debt, so there are some income requirements. However, after all of your payments are made the court forgives your remaining debt and you get to keep your home. If you have received a foreclosure notice or are falling behind on your mortgage payments, consult a foreclosure defense or bankruptcy attorney in your area.