Can You Foreclose on Someone in Bankruptcy?
When someone does not pay his mortgage loan on time, the lender has the legal right to foreclosure on the house or land backing the loan. However, if the debtor has filed for bankruptcy, the lender legally must wait to start or continue foreclosure proceedings.
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Initial Notification
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When someone files bankruptcy, all of his creditors--including mortgage holders--will receive a letter from the U.S. Bankruptcy Court advising them they must stop collection activity while the case is decided.
Time Frame
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It usually takes anywhere from three to eight months to finalize a bankruptcy proceeding.
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Chapter 7
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Chapter 7 cases usually require the debtor to turn over any assets, including a home. Therefore, foreclosure may not be necessary as the case progresses.
Chapter 13
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Chapter 13 allows debtors to restructure their obligations under court guidance and supervision. It may be possible for the debtor to pay the owed mortgage, or he may need to relinquish the property to the lender.
341 Meeting
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Any creditor with serious concerns about a debtor's bankruptcy can attend a 341 meeting regarding the case. All lenders will receive a notice of the hearing's date and can protest the case if fraud (such as lying on a mortgage application) could be involved.
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