Online Mortgage Calculator

If you are facing foreclosure you may need the answer to the question, ‘Can bankruptcy stop foreclosure?’ There is more than one type of bankruptcy filing that a debtor can apply to the court under than can reorganize or relieve them of their debt. Some of the times the home can be exempted from the proceedings and some of the times you will be required to sell the assets in order to satisfy the creditors. We will looks at some of the types in this article and you will then know the answer to your question.

A lot of people are under the mistaken impression that bankruptcy can stop foreclosure. In some cases you may get an order from the judge that will temporarily suspend the process, but you may also find that the process will continue once the stay if lifted. When you petition the court to forgive your debt or to step in and work with the creditor to make affordable payments with a length of time that will allow you to make payments down on the debt. There are federal rules under which these proceedings take place. Two bankruptcies that are for personal filers under this code are called, Chapter 7 and Chapter 13. The debtor comes under the protection of the court and in the beginning the two processes are very similar.

In Chapter 7 filings your bankruptcy may not stop foreclosure. In this pleading the assets of the debtor can be sold to pay off creditors. You may have to sell your home as part of the court ordered sale. Some states will exempt the home from sale, others have different guidelines. The equity that you have in your home may have to be used to satisfy your other debtors. This type of filing is also known as the liquidation plan and the judge will determine which assets will be liquidated to pay debt. Chapter 13 is called reorganization or repayment plan. The court will determine the amount of the debt that the debtor will be required to pay and the length of time that will be given for the debt to be paid. The debtor, with the advice of an attorney, will propose the amount that can be paid within a three or five year period. If the plan is acceptable to the court, then the plan will be put into place.

Whether you file chapter 7 or chapter 13 the court will issue a stay on all the creditors from collecting debt. This will stop the foreclosure process for a period of a few months. The court will determine what is to be done about the debt, whether it will be discharged or reorganized, and the process will continue. Creditors are allowed to file a motion for the stay to be lifted so that they can continue the collection efforts. The stay is put into place so that a period of time can elapse so the debtor can submit all the financial information to the judge that will be used in making the determination of the court. For the most part, a mortgage holder will be allowed to continue collection efforts if the debtor filed under chapter 7 protection. In chapter 13, if the debtor agrees to make the payments that are in arrears and stays current on the payment plan set forth by the court, then he/she will usually be able to retain possession of the home.

If you know that you are close to default on your home, you should contact an attorney that specializes in bankruptcy filings. They will be able to direct you to the best option for your situation. He can prepare the special forms that the court requires and he can help negotiate settlements with the creditors and with the lender that may have started the foreclosure process. If you want a bankruptcy to stop foreclosure you should elect to petition the court under Chapter 13 protection.