Many individuals facing bankruptcy are also behind on their mortgages and looking at a likely foreclosure of their homes. Thus a frequent question that bankruptcy attorneys here is whether the bankruptcy can stop the foreclosure.
The answer is that a Chapter 13 bankruptcy in which a person makes monthly payments to partially repay their debts can include in their plan a provision to pay back any arrearage on their mortgages and thus end the foreclosure. A Chapter 7 bankruptcy in which the debtor makes no payments does not stop the foreclosure; however, it can sometimes serve to slow down the procedure and thus allow the homeowner to stay in his or her home longer.
The filing of the Chapter 7 bankruptcy creates an automatic stay, which forbids a creditor from taking any action to enforce a debt, and this requires a mortgagee to put the foreclosure action on hold until the homeowner receives a discharge. Whether this actually slows down the foreclosure is somewhat a matter of chance. The mortgage company might be waiting for the statutory minimum periods to pass and the bankruptcy will make no difference. Or the creditor could go into bankruptcy court to allow the resumption of the foreclosure.
In the current environment though in which the courts are way behind processing the backlog of foreclosures a minor delay often turns out to allow the homeowner to stay in his house for a number of additional months.
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