How the Bankruptcy Automatic Stay Is Designed to Stop Foreclosure

When you file bankruptcy – whether Chapter 7 or Chapter 13 – the automatic stay kicks in.
The automatic stay is a court order that puts an immediate stop to all collection actions. Bankruptcy courts consider foreclosure a type of collection, along with:

•Phone calls
•Bills
•Wage garnishment
•Repossession
This protection kicks in the moment you file, and lasts for the duration of your bankruptcy case.
In the case of a Chapter 13 bankruptcy, this protection may be extended for several years. After bankruptcy, your mortgage debts should be up to date and settled and you shouldn’t need the protection of the automatic stay.
This powerful tool should be there to use only for when you need it the most: When you are on the verge of losing your home, and your debt is out of control.

Bankruptcy Provides Long Term Foreclosure Help, Too

Once you are in bankruptcy, depending on whether you file Chapter 7 or Chapter 13, the long term safety of your home will be addressed.
Chapter 13 bankruptcy laws contain strong home protections. In these cases, you may include your back mortgage debt along with other debts like car loans and credit card bills. All of your debts will be combined and ordered.
Then, instead of trying to keep up with mounting fees and several creditors, you’ll make one monthly payment to a bankruptcy trustee. Over the course of a court-approved repayment schedule, you can work to clear away your old debts in 3-5 years. During this time you should be protected by the automatic stay, and when you finish your repayment plan, your debts may be settled.
Chapter 7 bankruptcy is designed to eliminate unsecured debts, like medical and credit card bills. You may not include a home mortgage in this filing, but you may still be able to protect your home from foreclosure.
The automatic stay applies in Chapter 7 just as it does in Chapter 13. But because these cases are typically shorter, you’ll want to examine your state’s bankruptcy exemptions.
Chapter 7 exemptions vary by state, and outline property that is fully protected from a sale during a Chapter 7 case. In some states, these protections may extend to homes worth several hundred thousand dollars. If your house falls under the exemptions, then you should be protected from both foreclosure and the very rare Chapter 7 sale.

Get Foreclosure Answers With a Bankruptcy Lawyer

Bankruptcy provides foreclosure help in many different ways. But just like each home is unique, so is each bankruptcy case. Speak with a local bankruptcy lawyer for advice on how you can stop foreclosure and protect your home, by filing for bankruptcy. An attorney can answer your questions about how the laws in your state will affect your home and your debt.