Filing for bankruptcy will stop the clock on a foreclosure, giving homeowners a period of months or years to determine their next step. The two types of personal bankruptcy are Chapter 7 bankruptcy, which usually lasts for three to four months, and a Chapter 13, which typically lasts for three to five years. Any delay can help a homeowner avoid late payments. A late payment can remain on a credit report for up to seven years. 
In a Chapter 7 bankruptcy, homeowners can use the short delay to sell assets and make payments on the home to lessen the debt. In a Chapter 13 bankruptcy, homeowners can develop a payment plan based on their income level. Chapter 13 is the preferred option.
The clock on this type of bankruptcy starts running from the date the individual files the case. If the individual’s repayment plan ends early, the notation of the bankruptcy will drop off their credit report two to four years after they receive a discharge. In contrast, a credit bureau can report a Chapter 7 bankruptcy for up to 10 years.
Keep an automatic stay
When an individual has their bankruptcy lawyer in Decatur file a Chapter 7 or Chapter 13 bankruptcy, the court issues an order for relief. The order contains an automatic stay. This demands that creditors not engage in collection efforts. Homeowners want to avoid a lender’s motion to lift the automatic stay. This removes their protection to remain in the home during the length of the bankruptcy case.
If the automatic stay remains in effect, a homeowner who is selling the home and has filed for Chapter 7 bankruptcy can remain in the home. A homeowner who filed for Chapter 13 bankruptcy and wants to keep the home must craft a repayment plan that pays back missed mortgage payments. The Chapter 13 filer must also make regular mortgage payments on time for the length of their repayment plan.
When homeowners miss more than three payments, their lender may schedule the home for a foreclosure sale. If the sale was completed before the homeowners filed for bankruptcy, the home can go to auction. If the sale has not yet occurred, the stay will postpone the sale.
How to make payments
In a Chapter 13 bankruptcy, homeowners may make payments through payroll deductions. If a debtor fails to make payments under the confirmed plan, the court can dismiss the case or convert it to a Chapter 7 liquidation case.
When a Chapter 13 debtor is not able to complete their repayment plan, they can ask for a hardship discharge. The court typically makes a hardship discharge available only if the circumstances regarding a failure to repay were beyond the debtors’ control and creditors received at least as much as they would have in a Chapter 7 liquidation case.
We have offices all across the State of Alabama and file in every Bankruptcy Court statewide. If you call today, then our local bankruptcy lawyers in Selma, or wherever you live, can help you make the best financial decision in your case.
Devin O’Dell specializes in Bankruptcy and Probate & Estates Law. Mrs. O’Dell is licensed to practice in the State of Alabama and both the U.S. District Court of Northern and Middle Districts of Alabama. She regularly writes about bankruptcy and wills & trusts and enjoys speaking with clients about their estate planning needs.