How Does Filing Bankruptcy Stop a Foreclosure?

As a bankruptcy lawyer in Salt Lake City, the use of bankruptcy to stop a foreclosure has become common. Let’s say it is the day before the bank is going to foreclose on your home. By this point you are probably several months behind on the mortgage. You have received countless notices of default. You are worried that tomorrow your family will not have anywhere to go. What can you do?

Filing for bankruptcy can be a great tool in a debtor’s war chest. The moment you file for bankruptcy, you receive the protection of something called an automatic stay. This automatic stay prevents all of your creditors, including your home mortgage company, from proceeding with collection of their debt (including foreclosure). A creditor is not left without recourse. The creditor will have a chance to file a “motion to lift stay.” And, if granted, that would allow the creditor to proceed on the collection of its debt. However, if you find a decent bankruptcy lawyer in Salt Lake City, you should be able to minimize the likelihood of a court granting the “lift stay” by taking a few additional steps.

The automatic stay will continue to allow you to live in your home until 1) a motion to lift stay is granted; 2) the bankruptcy is dismissed; OR 3) The bankruptcy discharge. If staying in your home is a high priority, you need to tell your bankruptcy lawyer. This communication is important because the lawyer can then advise you on specific steps that should be taken, including whether to file a chapter 7 or 13 bankruptcy, in order to stop foreclosure and possibly keep your home.