Bankruptcy cannot prevent foreclosure, but it can delay it, giving homeowners time to liquidate debt and save money.

This information is intended as an educational tool only. It is not a substitute for the advice of a competent legal counsel or financial expert. We do not provide legal advice, so please consult with an attorney before making any decisions.

Once a homeowner files a bankruptcy, the court can enter a stay, which ceases all collection actions, sales and foreclosure. Before proceeding with a foreclosure, the lender must file a motion to lift the stay. This buys the homeowner time to get current on mortgage payments or sell through a short sale.

Types of Bankruptcy

  • Chapter 7: Liquidation to completely settle personal debts.
  • Chapter 13: Wage earner reorganization plan with payments made toward paying off debt in 3 to 5 years.
  • Chapter 11: Business reorganization to settle business debts.

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