How Long Does Bankruptcy Keep a House out of Foreclosure?
The current state of the housing market has left millions of American households facing the very real possibility of mortgage foreclosure. And many people have found that filing for bankruptcy may be able to stave off or prevent foreclosure. Here's a closer look at the link between bankruptcy and foreclosure.
Bankruptcy & Foreclosure
So what can bankruptcy do to prevent foreclosure?
- Bankruptcy CAN delay foreclosure action: When a bankruptcy case begins, a legal protection called the automatic stay takes effect and prevents all collection action against the filer. Foreclosure is considered a type of collection. The protection of the automatic stay may remain in effect for the duration of the bankruptcy case (generally about three to five years in Chapter 13 bankruptcy and about four to six months in Chapter 7 bankruptcy), or it may be for a shorter time period depending on the circumstances.
- Bankruptcy CANNOT modify the terms of a mortgage: Even in Chapter 13 bankruptcy, the court does not have the power to change the terms of a mortgage agreement. This means that a filer who wants to keep her home must continue making regular mortgage payments during and after the bankruptcy case.
- Bankruptcy CAN offer filers breathing room: Even when filers are unable to afford continued payments on their mortgage, they may be able to take advantage of the breathing room bankruptcy provides to make alternate living arrangements and/or save up money for a security deposit for a new residence.
- Bankruptcy CANNOT stop foreclosure in every case: Foreclosure laws and processes vary from state to state. In most places, a filer must file her bankruptcy petition before certain foreclosure proceedings occur in order to benefit from the protection of the automatic stay.
Bankruptcy may be able to keep a house out of foreclosure, but the amount of time for which foreclosure is delayed depends greatly on what type of bankruptcy a person files and where in the country he or she lives.
Learn More about Filing Bankruptcy to Stave off Foreclosure
If you are interested in learning more about whether filling for bankruptcy might help you protect your home from foreclosure, please take this opportunity to connect with a bankruptcy lawyer for a free legal consultation.