The Automatic Bankruptcy Stay
Filing a bankruptcy stops all collection proceedings, including foreclosure. When bankruptcy starts, foreclosure stops. I recently filed a Chapter 13 case that had the time stamp of 2:33 and 21 seconds PM to stop a foreclosure scheduled for 3 PM. The automatic stay went into place immediately and the foreclosure did not proceed – we prefer more notice than that, so contact us well before you are facing imminent foreclosure proceedings.But the foreclosure isn’t entirely halted, it’s just paused. So while you can almost certainly stop foreclosure proceedings so long as you qualify to file, you need to have a plan to follow through with. Usually that plan is a Chapter 13 reorganization.If you file a Chapter 13 bankruptcy, you may be able to restructure your debts to make your property more affordable. If you declare Chapter 7 bankruptcy, you may be able to erase enough of your unsecured debts so that you have a little more room in your budget to keep your home without having to go through a reorganization. But much of this has to do with whether your home’s affordability works out. If you can’t afford your home, it’s likely that you will need to continue the foreclosure or sell the property, if you are to recover financially.Still, bankruptcy can give you enough breathing room to figure out the future of your financial situation, and to determine realistically whether you are able to keep your home. Because a certain amount of home value is covered under bankruptcy exemptions, you don’t automatically lose your home if you file a Chapter 7 liquidation bankruptcy. There’s room to figure out how to keep your most important assets, with the right planning.
The Pros and Cons of Using Bankruptcy
Bankruptcy is a serious financial choice and shouldn’t be taken lightly. But if you’re already in the situation of approaching foreclosure, bankruptcy is frequently the best option. You do need to think about whether you’ll be able to keep your home with or without bankruptcy, and you should consider strongly whether Chapter 7 or Chapter 13 is best.
I will sometime refer to Chapter 13 as “pay for a stay”, meaning that you can keep your home under the protection of the bankruptcy stay, but you have to pay for it. Many people are able to get out of their Chapter 13 early and keep their home through a loan modification, refinance, or some other loss mitigation options available to them.
