Filing Chapter 7 Bankruptcy to Stop Foreclosure
Chapter 7 bankruptcy may not stop the process permanently but it could help you gain more time to develop a solution that will help you keep your home. The filing may give you more time to come up with funds you can use to get your mortgage caught up.
When Chapter 7 bankruptcy is filed the automatic stay goes into effect. The action stops or temporarily prevents collection actions against the debtor by creditors. In this case your lender should cease collection attempts against you when they receive notification of your filing.
In some cases the lender may look to ask the court to remove the stay to proceed with foreclosure . Often, the automatic stay remains in place if the lender doesn’t provide the court with accurate information claiming to be the mortgage holder. Since mortgages are known to be lumped together or sold to other institutions, the creditor pursuing foreclosure may have a challenging time in providing proof to the court.
The stay could give debtors an additional month or two (depending on their situation) when it comes to delaying foreclosure. The additional time may help homeowners save money to put toward defaulted mortgage payments. If the bank doesn’t obtain a buyer for the home, you could still keep your home even if the stay is lifted due to delays that are part of the foreclosure process.
Chapter 7 may help you discharge unsecured debt; meaning you’ll have more money to put toward your mortgage. Questions and concerns should be reviewed with an experienced bankruptcy expert.