A: 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. So the short answer to “Can filing bankruptcy stop a foreclosure sale and save your home?” is yes—so long as the sale confirmation has not occurred a bankruptcy filing will stop the process in its tracks. I have filed numerous cases where a family’s home was to be sold at a sheriff’s sale the following day.
The moment you file a bankruptcy a court injunction known as an “automatic stay” kicks in. This injunction stops all collection activity immediately. Simply put, your creditors can no longer do anything to bother or contact you nor can they take anything that is yours. This includes selling your home at a sheriff’s sale.
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.
Avoid the Biggest Mistake
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.
Now, it is important to consider all of the repercussions of filing bankruptcy just to stave off a sheriff’s sale on your home. You will have to deal with the back payments and interest owed. This can best be done by filing a Chapter 13 bankruptcy. In that type of bankruptcy, you will be able to get caught up on your payments and any penalties over time (36-60 months). You will likely be able to pay the missed payments and fees interest-free. But, you will also have to make regular payments as well. So, before you file it is important for us to go over your budget and see if this will be possible
If you are facing a foreclosure, the best thing you can do is visit with me as soon as possible. The sooner that you and I deal with the problem the more options will be available to you. In some cases, you might avoid bankruptcy entirely. Our firm handles cases throughout the state of Missouri. Please call our office today for a free bankruptcy consultation, either in my office or by telephone: Contact Us.