Will Filing Bankruptcy Stop Foreclosure?

The number of homes that have been foreclosed in the last two years is breathtaking. In addition, the number of people behind on their mortgage payments is at an all-time high. Bankruptcy provides a solution when foreclosure becomes a possibility.

Benefits

Filing bankruptcy is a truly worthy part of our legal system because bankruptcy is about forgiveness. Bankruptcy helps keep families together, frees up income and resources, and keeps the ranks of the homeless from growing even larger.

Automatic Stay

One of the most powerful aspects of bankruptcy is an automatic stay, a court order that takes effect as soon as bankruptcy is filed and protects people from certain actions by creditors. Once bankruptcy is filed, most creditors cannot take any further action while the bankruptcy is pending.

Bankruptcy Code

Section 362 of the Bankruptcy Code prohibits "any act to obtain possession of property of the estate, to obtain possession of property from the estate, or to exercise control over the property of the estate."

Exceptions

The law does not allow homeowners to prevent foreclosure by filing bankruptcy over and over. Creditors can file a motion asking the court to allow the foreclosure and sale of the home if there is little equity remaining.

Warning

Filing bankruptcy repeatedly to stop a foreclosure can result in a bankruptcy court preventing the homeowner from filing bankruptcy again in the future.