Does Filing for Bankruptcy Stop Foreclosure?

Facing foreclosure is a stressful and overwhelming experience for any homeowner. When financial difficulties make it impossible to keep up with mortgage payments, many wonder if filing for bankruptcy can stop foreclosure. The answer depends on the type of bankruptcy filed and the specific financial circumstances of the homeowner. At The Law Firm of Marshall A. Entelisano, we help individuals navigate the complexities of bankruptcy law to find solutions that protect their homes and financial futures.

Understanding the Automatic Stay

One of the most immediate benefits of filing for bankruptcy is the automatic stay. When a bankruptcy petition is filed, the court issues an automatic stay, which temporarily halts all collection actions, including foreclosure. This means that your mortgage lender must stop foreclosure proceedings while your bankruptcy case is being processed. However, the protection provided by the automatic stay depends on the type of bankruptcy you file and other factors.

Chapter 7 Bankruptcy and Foreclosure

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is designed to discharge most unsecured debts, such as credit cards and medical bills. While it does not eliminate mortgage obligations, it can provide temporary relief from foreclosure.

How Chapter 7 Affects Foreclosure:

• The automatic stay will stop foreclosure proceedings for a limited time, typically for a few months.
• If you are behind on mortgage payments and cannot catch up, the lender can request the court to lift the automatic stay, allowing foreclosure to resume.
• Chapter 7 does not provide a long-term solution to keeping your home unless you can make arrangements with your lender.

For homeowners who do not have the means to catch up on missed payments, Chapter 7 may serve as a way to delay foreclosure while exploring other options, such as selling the home or negotiating a loan modification.

Chapter 13 Bankruptcy and Foreclosure

Chapter 13 bankruptcy is a reorganization plan that allows individuals with a steady income to restructure their debts and create a repayment plan over three to five years. This type of bankruptcy is often a better option for those who want to stop foreclosure and keep their home.

How Chapter 13 Helps Homeowners:

• The automatic stay stops foreclosure immediately upon filing.
• Past-due mortgage payments can be included in the repayment plan, allowing homeowners to catch up over time.
• As long as payments are made according to the plan, the lender cannot proceed with foreclosure.
• Chapter 13 provides a structured way to manage debt without losing essential assets.

For homeowners who are behind on payments but have the ability to make structured repayments, Chapter 13 is often the best way to prevent foreclosure permanently.

Can Bankruptcy Prevent Foreclosure Permanently?

While filing for bankruptcy can stop foreclosure temporarily, whether it prevents it permanently depends on your ability to meet future financial obligations. Chapter 7 may only provide a delay unless you can negotiate with your lender, while Chapter 13 offers a structured plan to get back on track and keep your home.

Alternatives to Bankruptcy for Avoiding Foreclosure

If bankruptcy is not the right choice for you, there may be other options to prevent foreclosure, such as:

• Loan Modification – Negotiating new terms with your lender to make payments more manageable.
• Forbearance Agreement – Temporarily reducing or pausing mortgage payments due to financial hardship.
• Short Sale – Selling your home for less than what is owed with lender approval.
• Deed in Lieu of Foreclosure – Voluntarily transferring property ownership to the lender to avoid foreclosure.

Contact Our Foreclosure Lawyers

Navigating the complexities of bankruptcy and foreclosure can be daunting, but understanding your options and seeking professional guidance can make all the difference. If you're facing foreclosure or considering bankruptcy in Tuscaloosa, AL, the Law Firm of Marshall A. Entelisano is here to help. Our experienced attorneys can provide the legal support and advice you need to make informed decisions and protect your financial future. Contact us today to schedule a consultation and take the first step towards resolving your financial challenges.

Find out how I can help you avoid foreclosure in a free consultation. These are available virtually or in person. Call (659) 336-2597 or reach out online to schedule yours.