Are you facing a foreclosure and wondering if a bankruptcy will stop it? There are two main types of bankruptcy, Chapter 7 and Chapter 13, and each can alter your foreclosure differently.
A Chapter 7 bankruptcy will temporarily stop your foreclosure, but you could still lose your home at the end of bankruptcy. While your bankruptcy is pending, your creditor will not be able to pursue any collection efforts on the mortgage debt without asking the bankruptcy court to lift the automatic stay and continue the foreclosure action.
However, once the protection of the court is lifted you might not owe the mortgage anymore technically but you cannot get rid of the mortgage debt AND keep the house. In most cases, you will remain in foreclosure after the Chapter 7 unless you can get caught up prior to or shortly after filing the Chapter 7 and signing something called a reaffirmation agreement agreeing that you will owe the entire mortgage on the home in the future.
What happens if your home goes into foreclosure without a bankruptcy? Generally, you will be liable for any deficiency still owed on the mortgage after the foreclosure sale. However, if you file the Chapter 7 bankruptcy you can surrender the property and walk away from the underlying mortgage. 
This means that if you are willing to give your home back to the mortgage company and surrender it then you can file a Chapter 7 and no longer be liable for any debt associated with the mortgage.
A Chapter 13 bankruptcy will temporarily stop the foreclosure and could allow you to keep your house if you are delinquent. Depending on your circumstances, you may or may not keep your home. An experienced bankruptcy lawyer can tell you better if Chapter 13 would be right for you.
Want to stop the foreclosure and keep your home in a Chapter 13 bankruptcy? You will have to show the bankruptcy court that you can :
- Afford to continue to make your regular mortgage payments
- Be able to catch up the mortgage arrearage through your three to five year bankruptcy plan
This means that you might be able to pay your arrears (back payments) spread out over a five year period while also making your monthly mortgage payments during this time as well. Then at end of five year payment plan you’ve paid your arrears and are current on the mortgage. Many times your other debts can be lowered in the payment plan to in order to free up some of your budget to afford this payment and your mortgage but it all depends on your particular situation.
Attorney Steven A. Harris regularly blogs in the areas of family law, bankruptcy, probate, and real estate closings on this website. Mr. Harris tries to provide informative information to the public in easily digestible formats. Hopefully you enjoyed this article and feel free to supply feedback. We appreciate our readers & love to hear from you!