Thursday, June 23, 2022

Does Bankruptcy Always Stop Foreclosure?

If you are struggling with debt and you are also struggling to make mortgage payments, you might have heard information about bankruptcy being able to stop a foreclosure. When you are at risk of your home going into foreclosure and one of your primary aims in filing for personal bankruptcy is to stop the foreclosure and to be able to remain in your home, you may be planning to file for bankruptcy to get back on track with your mortgage payments. However, it is important to understand that not all bankruptcy chapters have the same effect on foreclosures.

If you are planning to file for bankruptcy with a primary aim of stopping foreclosure on your house, it is critical to seek advice from an Oak Park bankruptcy lawyer about your case. We can provide you with more information about the ways in which bankruptcy and foreclosure can be connected, and we can help you to file for the type of bankruptcy that is best suited to your circumstances.

In the meantime, consider some of the following information that helps to clarify the ways in which bankruptcy has the ability to stop home foreclosures.

Automatic Stay Initially Stops Foreclosure in All Bankruptcy Cases

In every consumer bankruptcy case, the automatic stay will initially stop a foreclosure from moving forward or taking place. However, the automatic stay cannot stop foreclosures indefinitely in all types of bankruptcy cases.

You Cannot Keep Your House if You are Filing for Chapter 7 Bankruptcy and Behind on Your Mortgage Payments

If you are filing for Chapter 7 bankruptcy, the automatic stay will initially stop a foreclosure, but it cannot permanently stop a foreclosure and allow you to keep your home. If you are behind on mortgage payments, you will likely need to plan for the lender to take possession of the property or to sell the house.

Chapter 13 Bankruptcy Can Stop Foreclosure and Allow You to Keep Your Home

If you want to use bankruptcy to stop a foreclosure and to keep your home, you will want to file for Chapter 13 bankruptcy. This type of reorganization bankruptcy will allow you to keep your home. How does it work?

The automatic stay will apply as soon as you file for Chapter 13 bankruptcy, and the lender will not be able to move forward with any aspects of a foreclosure case—whether it is initially filing an action to initiate a judicial foreclosure or moving forward with an existing foreclosure case. Then, since Chapter 13 bankruptcy is a kind of reorganization bankruptcy, you can create a repayment plan that will allow you to catch up on back-owed mortgage payments and to remain in your home.

Contact an Oak Park Bankruptcy Lawyer Today

If you have questions about how filing for bankruptcy can stop foreclosure, or if you need assistance with your Chapter 13 bankruptcy case, one of our experienced Oak Park bankruptcy attorneys is here to help with your case. Contact the Emerson Law Firm to learn more about how we can assist you.

See Related Blog Posts:

Should Consumer and Commercial Trustees be Distinct in Chapter 7 Cases?

What Questions Should I Ask a Bankruptcy Lawyer?

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