How Filing for Bankruptcy Can Stop the Foreclosure Sale
Are you at that point where you have been notified that your home will soon be put up for a foreclosure sale? The notice can come from the mortgage lender himself if your state has non-judicial foreclosure or from the lawyers of the lender if the state has judicial foreclosure. Once you get a notice, you should try as hard to stop this foreclosure sale from happening.
The only actual thing you can do to put a stop to the foreclosure sale is settling your mortgage balances. But if you were able to do that, you would not be in this predicament now.
One other choice that you can consider is to file for bankruptcy. When you are declared bankrupt, you enjoy a thing called "automatic stay". This means that all people who file for bankruptcy can have their civil actions like foreclosure temporarily restrained. But this does not mean that if the foreclosure sale will happen at 9:00 in the morning, you can file for bankruptcy at 8:59. You need to allow for enough time to send a notice to the mortgage lender about the filing. This can, however, be done in a matter of minutes.
Individuals can use two kinds of bankruptcies - the Chapter 7 and the Chapter 13.
The first one, Chapter 7, can delay any foreclosure sale using the "automatic stay" clause. But the foreclosure sale will only be suspended and not stopped. Stopping it will only happen if you pay the lender. Otherwise, the lender can file a claim in the bankruptcy court to allow him to push through with the sale. Usually the bankruptcy court will agree to this.
The second kind, Chapter 13, does have the capacity to stop the sale. The "automatic stay" clause is still in effect but you are given the chance to pay off the mortgage in arrears and over a period of time. Once you have completed the payments, the foreclosure sale will no longer happen. But if you cannot complete this plan, the mortgage lender can file with the bankruptcy court to allow him to pursue the sale. As with the first scenario, the bankruptcy court will usually agree.
There are not that many options to stop the foreclosure sale aside from paying off the mortgage or declaring bankruptcy. You may have a talk with the lender but usually after the foreclosure sale has been placed in process, the lender will no longer talk to you or agree to stop. But you can still try to ask for a delay.