Can bankruptcy stop foreclosure or delay it?

Filing personal bankruptcy--more specifically chapter 13--can stop foreclosure. Your bankruptcy petition comes with an automatic stay. The automatic stay immediately stops the foreclosure proceedings at any stage of the process. This means that your lender or the county where you live can’t file, start or continue a foreclosure lawsuit.

Thus, filing bankruptcy allows you to pay the money you owe under a repayment plan approved by the U.S. Bankruptcy Courts. The repayment plan requires you to make monthly payments to a bankruptcy trustee who distributes the money to your creditors. Typically, your lender or county are considered priority and are paid first. You will make payments for three to five years depending on your repayment plan. Once you complete your repayment plan, the need for the foreclosure is eliminated. In other words, through bankruptcy you’ve made the back payments so the lawsuit is warranted.

The only time bankruptcy can delay a foreclosure if your case is dismissed. Typically, a bankruptcy case is dismissed if you don’t show up for the meeting or the creditors or missed bankruptcy or mortgage payments. For instance, your lender can petition for the automatic stay to be lifted, if you fail to keep your mortgage payments current. Or the bankruptcy trustee can petition the U.S. Bankruptcy Courts to dismiss the case for non-payment.

Talk to a lawyer about filing bankruptcy to stop foreclosure. The lawyer will make sure you meet chapter 13 eligibility requirements such as failing the means test and completing a pre-bankruptcy credit counseling.