Bankruptcy Stops Foreclosure
Filing a bankruptcy case will immediately stop a foreclosure from happening. As soon as a bankruptcy case is filed, no matter if it is chapter 13 or chapter 7, a court order automatically goes into place (the automatic stay) that halts all creditor activity. As long as the petitioner (person filing the bankruptcy case) does not have multiple bankruptcy case filings within a short period of time, the protection is immediate.
Chapter 7 and Foreclosure
A chapter 7 bankruptcy case filing will stop a foreclosure from happening. In a chapter 7 case, the petitioner is usually seeking an immediate discharge form their unsecured creditors. Chapter 7 wipes the slate clean of unsecured debts. It is not a restructuring, or payment plan to pay back certain creditors. While chapter 7 will halt the foreclosure of the home, there is nothing in place to bring the home current. The stay will remain in place as long as the chapter 7 is active. Chapter 7 cases are generally only active for a few months. If a petitioner is filing chapter 7 to stop a foreclosure, they will probably have to find a way to get the loan for the home current while they are still protected by the court. Home lenders usually file a "motion to lift the automatic stay" or a petition to the court to take the home out of the bankruptcy protection when a foreclosure is stopped by a chapter case filing. So again, for these reasons if you are filing a chapter 7 to stop foreclosure and you want to save your home, you should probably have a way to bring the home current while you are protected.
Chapter 13 and Foreclosure
Chapter 13 is generally the chapter of bankruptcy chosen by petitioners who want to save a home. Chapter 13 cases are 36 to 60 month payment plans. A chapter 13 petitioner pays their "disposable income" to a chapter 13 trustee who in turn pays creditors according to statutory rank. It is because secured creditors are higher in rank than unsecured creditors, the chapter 13 trustee is able to pay whatever mortgage arrears there are on the home to the mortgage lender, eventually bringing the home current during the 36 to 60 month plan. For this reason, chapter 13 bankruptcy is an excellent way to protect a home upon filing, and then eventually bring the home current.
Contact a Bankruptcy Lawyer in Phoenix
If your home is behind or you are facing a foreclosure, you have options. Do not wait as mortgage arrears accumulate quickly. We want to help you keep you in your home. Contact an experienced bankruptcy lawyer here in Phoenix to understand your rights and obligations. We offer free initial consultations. 480-355-1377