Can Chapter 7 bankruptcy stop a foreclosure?
Yes, in a way
Once you have filed for Chapter 7 bankruptcy protection, the “automatic stay” goes into effect, stopping the collection processes undergone by your lenders. With the automatic stay in effect, your lender must stop the foreclosure process. Your home then remains in your possession until the bankruptcy proceedings have been complete. However, lenders may have the option to request the court lift the automatic stay before your bankruptcy is completed. If your lender can prove that they are the legal holder of the mortgage for your home, the court may lift the automatic stay resulting in the foreclosure process continuing if they can prove there is “cause” One of the grounds for cause is that the lender is not protected by an adequate equity cushion meaning the property is worth less than what is owed to the secured lender.
Chapter 7 bankruptcy and delaying foreclosure
A typical bankruptcy case takes around 3 months to complete. During this time the foreclosure process on your home is stopped. Delaying foreclosure, by even a few months, can be a financial victory. For example, if your mortgage payment is $3,000 a month, that would be a potential savings between $7,000-$9,000 dollars. Chapter 7 bankruptcy often cancels all the personal liability of the debt secured by the home, including home equity loans and mortgages. Chapter 7 also typically releases the homeowner’s tax liability for losses the mortgage lender incurs as a result of the homeowner’s default. Unfortunately, there are some exceptions to this general rule so make you sure you contact an experienced bankruptcy attorney to make sure that an exception does not apply.
If your home is in danger of being foreclosed on you should talk to a Los Angeles Bankruptcy attorney as soon as possible. To learn which chapter of bankruptcy will keep you in your home the longest, or allow you to keep you house, please contact Ure Law Firm today, (800) 250-5175.