Will a bankruptcy case stop a foreclosure cold?

In the depths of the current housing crisis, more people than ever are interested in the intersection of foreclosure law and bankruptcy.

The short and skinny answer to the question posed above is “YES,” the filing of a consumer bakruptcy case will stop a forecloseure in its tracks. I am always a little amazed at how close some consumers at willing to cut it — it is usually best to seek counsel before the day of the foreclosure auction, one reason being that you are required to arrange for credit counseling before the case can be filed with the bankruptcy court.

Once the bankrutpcy is filed and the foreclosure auction called off, what happens going forward depends greatly on the type of bankruptcy case involved. Chapter 7 filers will usually get only a short repreve of perhaps a few weeks, until the lenders file with the bankruptcy judge a request to resume with the foreclosure process.

Chapter 13 filers, on the other hand, will be drafting a plan for repayment of the mortgage arrearages, which in some cases will buy them up to 60 months of time to catch up with their payments, during which time they live in and use their property. Chapter 13 filers may also be eligible to eliminate second mortgages or equity loans that are sapping their ability to make ends meet.

There are several qualification tests for Chapter 13 eligibility, and you will want to consult with a Massachusetts or New Hampshire bankruptcy attorney to see if you will qualify.


By Doug Beaton

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