The foreclosure process stops once a bankruptcy case is properly filed.
Chapter 7 and Stopping Foreclosures
Chapter 7 bankruptcy stops the foreclosure process, but it is not designed to protect your property for the long term. This is because Chapter 7 bankruptcy is designed to liquidate your assets. Once a Chapter 7 case is filed, the foreclosure process will have to stop so that the trustee can determine if your property can be liquidated for the benefit of your creditors. If the trustee determines that the property does not have enough equity to warrant liquidation, then your mortgage company will be free to foreclose. The mortgage company may not want to foreclose and may be willing to work with you, but there is an inherent risk of loss of property in a Chapter 7.
Chapter 13 Bankruptcy will also stop the foreclosure process.
Chapter 13 is designed to protect your home for the long term. In a Chapter 13 Bankruptcy, the homeowner does not have to worry about how the mortgage payments that have been missed are going to be repaid. In fact, the mortgage company will be paid, through the bankruptcy trustee, the missed mortgage payments. The homeowner is still responsible for future mortgage payments. This aspect of the Chapter 13 plan is very similar to a loan modification. Look at my article about Loan Modifications and Bankruptcy for more information on this topic.
Chapter 13 bankruptcy can also resolve many issues relating to back Homeowner Association Dues that may be owed. Like back mortgage payments, back HOA dues are also typically paid through a Chapter 13 plan.
A word of caution! At times mortgage companies are not responsive to property owner’s requests to negotiate or work out a repayment plan. Delays in the loan modification process can put the homeowner in a difficult predicament. Keep in mind that there needs to be enough time for a Chapter 13 bankruptcy to be filed before the foreclosure takes place. Someone awaiting a loan modification needs to make sure that there is enough time to file for bankruptcy to stop foreclosure if his/her mortgage company does not voluntarily stop the foreclosure process. Otherwise, a property owner may end up waiting without having any assurance from his/her mortgage company that the foreclosure of the property in question has been stopped.
If you are facing a foreclosure action in Metro Atlanta or in North Georgia, give us a call 678-507-1590 for a free consultation.