Can you stop a foreclosure with bankruptcy?

Your lender has informed you that they’re thinking about starting the foreclosure process. Maybe you’ve gotten the first official notice – there are many pieces of paperwork that you should receive on a very specific timeline – or maybe you’ve just realized that foreclosure is looming because you’ve missed payments. Either way, you’re looking for solutions.

Someone tells you that filing for bankruptcy is going to put an automatic stay on your foreclosure case. They tell you that this is a great way to stop foreclosure from occurring. Once you file for bankruptcy, they say, the lender can no longer proceed with the foreclosure and take your home. You get to stay, and so does your family.

This all sounds too good to be true, so you may wonder at this point if there’s a catch. And the problem is that, while this is based on truth, it is not always 100% accurate.

The automatic stay is temporary

The thing you have to realize is that the automatic stay, which immediately goes into effect when you file for bankruptcy, is only a temporary solution. It does mean that your lender can’t proceed with the foreclosure, but only until that bankruptcy case is over or the stay has been lifted. Once it is, the lender can begin the foreclosure proceedings all over again.

That doesn’t mean that bankruptcy isn’t helpful, though. You may be able to fix your finances, eliminate your debt, restructure your budget and take a lot of other steps to put yourself in a better financial situation. Chapter 13 is designed to allow people with income to catch up on secured debts which are delinquent.

If you have any questions about how this process works, a bankruptcy attorney can advise whether bankruptcy may be the right option for you and your family.