Many people will file Chapter 13 bankruptcy to stop home foreclosure. Rather than liquidate your debts through a Chapter 7, a Chapter 13 allows you to restructure or reorganize your debts while protecting your assets. However, sometimes people are not in a financial position to continue to make payments on their home and may have no equity, so they may decide to file a Chapter 7 and walk away.
The filing of a Chapter 7 “liquidation bankruptcy”, stops a pending home foreclosure while the bankruptcy is finalized. This occurs through an “automatic stay,” which freezes most creditor collection actions the moment you file bankruptcy. The bankruptcy filing stops “any act to . . . enforce any lien” against your property and since a mortgage lender’s foreclosure of your home is an act to enforce a lien, the bankruptcy filing stops the foreclosure while you make other arrangements.
For many, an automatic stay can provide the time they need to get their affairs in order. Someone facing a difficult financial situation may not want to, or be able to continue making mortgage payments, preferring to explore other living arrangements until they get back on their feet. An ‘automatic stay’ can extend their time in their current home to save money and line up alternatives. Typically, a consumer Chapter 7 bankruptcy case takes about 3 or 4 months and the automatic stay is in effect that whole length of time, providing some breathing room to chart a path.
However, there are a couple of caveats to consider. Your bankruptcy filing must be timed to stop the foreclosure before you lose your rights to your home. Also, it is always possible that the mortgage lender will seek relief from stay, which, if awarded, will shorten the time you have exit your home. It is vitally important to consult with an experienced bankruptcy attorney in your state if you are facing the foreclosure of your home. Timing your bankruptcy requires a thorough understanding of both federal bankruptcy law and Illinois state property and foreclosure law to ensure the best possible outcome.
Contact an Attorney Experienced with Delaying Foreclosure
If you are considering Chapter 7 or a Chapter 13 bankruptcy to stop a home foreclosure, contact the Peoria Bankruptcy Law Offices of Charles E. Covey, LLC for more information today at 309-874-8125.