Can bankruptcy save your home?

Can filing bankruptcy stop a foreclosure sale and save your home?

Yes, it can stop the foreclosure process,  (see California Foreclosure information) and allow you time to catch up on the past due amounts, provided that you act soon enough.

In today's economy, foreclosure sales are happening with increased frequency.  People are unable to maintain the payments on their mortgages, go into default, and when they are unable to work out payments arrangements with the bank, eventually they lose their homes.

Filing bankruptcy can stop a foreclosure sale.  The automatic stay will stop a pending foreclosure sale on your house (so long as you haven't had a prior bankruptcy case dismissed within the past 12 months).  The automatic stay remains in effect until your case is completed or dismissed.

 The most typical Chapters to use to stop a foreclosure are Chapter 13, because you can propose a Plan of repayment that catches up (cures) on the past due amounts you owe to your mortgage or other lenders against your home, over a 36 to 60 month period, and Chapter 11, which also allows a longer term cure of arrearages.   This, of course, assumes that you are otherwise eligible to file Chapter 13 (or 11) and have the regular income sufficient to propose such a plan.    Plus, in some situations, you may actually be able to eliminate junior liens on your property entirely.  Visit my Chapter 13 page for more information.

Chapter 7 will temporarily stop a foreclosure sale, but usually just for a month or two.  Since no payments are made in a Chapter 7 case, you would need to negotiate with a foreclosing creditor outside the bankruptcy case to resolve your issues, if possible.

THE BIGGEST MISTAKE that people make is waiting until a few days prior to the foreclosure sale date to look into bankruptcy as an option.  At that point it will be difficult to find an attorney who can properly process everything in time to get your case filed on time, and you increase the likelihood of serious mistakes that way.

In most California foreclosures, the process begins with a recorded Notice of Default by the lender.  You have three (3) months from the date that Notice is recorded before they can publish a sale date.  You then have an additional 21 days after the sale notice goes out before the actual sale.  The best time to consult with a bankruptcy attorney is DURING THE INITIAL 3-MONTH NOTICE OF DEFAULT PERIOD.  You can of course inquire later, but the closer you get to the sale date, the less options you will have and the less likely it will be to succeed

In addition to stopping foreclosure sale on your home, Chapter 13 also allows you to remove certain judgment liens against your home in some instances as well as undersecured mortgages or deeds of trust.  A qualified bankruptcy attorney can explain these options to you.