Today a client called me and asked, as many of my clients have in the past, if bankruptcy will stop a foreclosure sale. Well, I explained, it depends on what type of bankruptcy you file and whether you have filed before and if so how recently. If you are willing and able to bring your mortgage payments current, but just need some time to do it, then in most cases bankruptcy will stop a foreclosure sale of your house.
Does a Bankruptcy Stop a Foreclosure Sale?
Whether bankruptcy can stop a foreclosure sale date of your house primarily depends on whether you want to stop foreclosure for good, or just for a few months and then move to another home. Filing under any Chapter will almost always stop foreclosure for the near future, by virtue of the automatic stay. The question is, for many clients, will it stop it permanently? For some of my clients, a few more months of staying in their home is all they are looking to accomplish. But for many of my clients, their goal is to keep their home. Temporarily stopping a foreclosure does not give them the result they need. They need a permanent solution, so they can save their home.
If you are behind on your payments, your lender can obtain relief from the bankruptcy stay and foreclose on your home notwithstanding that you filed for bankruptcy, unless you file a repayment plan under Chapter 13, and repay all of your missed payments over time.
So bankruptcy will generally stop foreclosure for the short term, but if by stopping foreclosure you mean that you want to stop a foreclosure long term, you will have to file a repayment plan and you will have to talk to a lawyer to make sure that you qualify for a Chapter 13 repayment proceeding. Repayment bankruptcies have strict qualification requirements.
Multiple Case Filings
If you have had multiple case filings within the past 12 months, then your filing may not permanently stop a foreclosure sale, even if you file a repayment plan under Chapter 13. The reason is that when you file bankruptcy twice, there may not be a bankruptcy stay in a repeat filing.
Other Ways to Stop Foreclosure
There are other ways to stop a foreclosure, such as a loan modification or a short sale. But these remedies are not your right. They are totally discretionary with your lender. These remedies are also very risky and many people lose their homes during the process. Here’s why:
When you are facing a foreclosure sale and apply for a loan modification or short sale, your lender will typically continue the foreclosure sale each month, and only for one month, while it reviews your loan mod package or short sale proposal.
Your lender will typically make you wait until 2-3 days before the scheduled foreclosure sale date before it continues the sale date, and then it will typically continue the sale for only 30 days. So the next month you’re in the same situation, you’re waiting to the last minute to see if your lender continues the sale date.
What happens many times is that after a few continuances of the sale date, your lender informs you that your loan mod request or short sale proposal is denied. You receive this notice 2-3 days before the sale date and that may be too little time to prepare and file a bankruptcy, depending upon your circumstances and attorney availability. The result, you lose your most prized possession, your home.
A Reliable Solution
Because of the uncertainties and high risk of foreclosure associated with the loan modification and short sale processes, bankruptcy, by far, is the most reliable solution for saving your home. You have a Constitutional Right and Federal Right to file bankruptcy. If you talk to an experienced lawyer, and your lawyer determines that you are qualified to file and obtain the type of relief that is suited to your needs, then you can use the protections of bankruptcy to save your home.