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What Happens When Chapter 7 Bankruptcy Is Filed during a Pending Foreclosure?

Posted By Allmand Law Firm, PLLC || 7-Oct-2013

Use Bankruptcy to Avoid Foreclosure

Many who qualify to file Chapter 7 bankruptcy may do so due to foreclosure proceedings against their home. The filing process helps stop proceedings from moving forward and it may give you more time to plan your next move and explore options. Some may wonder if the filing process will have an effect on the sale of a home, especially if a date has yet to be determined. This is often a concern for those who file just days prior to the sale occurring.

While the process may vary depending on the state you live in, for most people they experience similar actions depending on how far their foreclosure has progressed before they filed for protection. Many filers have between 6 weeks and 3 months of extra time to stay in their home when the automatic stay goes into effect when the bankruptcy petition is filed. With the stay in affect the lender will stop or postpone foreclosure proceedings until they learn from the court the stay has been removed.

What happens next may depend on whether you want to keep your home. Filing may give you additional time to reach an agreement with the lender. The lender, on the other hand, may be able to help you relocate if you decide not to stay in the home. Some offer relocation assistance depending on qualifications. While filing bankruptcy can help in discharging unsecured debt, few file since it may give the extra time needed to make a rational decision about their home without the added pressure from the lender.

Reference: http://www.foxbusiness.com/personal-finance/2013/10/01/file-bankruptcy-to-stall-foreclosure/

Categories: Foreclosures
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