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Can bankruptcy stop a foreclosure?

On Behalf of | May 3, 2022 | Personal Bankruptcy |

After you miss a few mortgage payments, your lender decides to foreclose on the property. You mentioned the dilemma to a friend, and they tell you that all you need to do is declare bankruptcy. If you do, then the lender can’t move forward with the foreclosure and you get to continue living in your home.

This sounds too easy to you, but your friend is convinced that this is how it works. Are they right and is this an option that you should consider?

Bankruptcy creates an automatic stay

Your friend is only half correct. They are right that filing for bankruptcy is going to create an automatic stay. This will put any other court cases, such as your foreclosure, on hold. In that sense, this can allow you to keep your home for a bit longer and it means that you won’t lose the property until the court sorts out your bankruptcy case.

However, the automatic stay is only temporary. The pause on your foreclosure really only continues until the bankruptcy case is over. At that point, your lender could resume the foreclosure proceedings.

That being said, declaring bankruptcy may help you fix your finances and make it possible to get caught back up on your mortgage and stay current. Your lender will almost always prefer this over foreclosing and having to sell your home, so they may be open to it at this time.

It’s important to fully understand all of the legal options you have in a situation like this. Even when friends and family members mean well, their advice may not always be fully accurate. It can help to work with an experienced legal team. 

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