If I file bankruptcy, will it stop the foreclosure of my home?

By Alfred Villoch, III, Esquire, at Savage, Combs & Villoch, PLLC If you’re a few months behind on your mortgage payments, the bank that loaned you the money to purchase your home (or alternatively, the company that services the loan) will likely file a lawsuit with the intent to sell your house and use that money to pay down your loan. If the money achieved from the sale is not enough to pay down the entire loan, the bank can still pursue you for the remainder owed or the deficiency. This process is commonly called foreclosure and the pursuit of a deficiency judgment. If you file bankruptcy before the foreclosure sale, however, you will get temporary relief from the foreclosure. Specifically, upon the bankruptcy filing, you will get the benefit of the “automatic stay,” which stays all actions of your creditors not brought before the federal bankruptcy court, and this will include the foreclosure action. It is important to understand that this stay is often times only temporary and will depend on how active your bank is in pursuing the foreclosure. An active bank will immediately file a motion with the bankruptcy court to lift the automatic stay. Once the motion is filed, and if there are no objections, the bankruptcy court will allow the stay to be lifted so that the bank can resume the foreclosure proceedings against you and your home. Next, the bank will file a copy of the bankruptcy court order with the state court handling the foreclosure action. This will let the state court feel comfortable knowing it has the bankruptcy court’s permission to resume the foreclosure proceeding. At that point, the court will reset the auction date and instruct the bank to publish notice of the sale. In short, a bankruptcy filing will likely delay the foreclosure sale of your home for a few months, maybe several months. In that time period, you and your attorney can try to negotiate a new repayment plan for your home to stay. But make no mistake, if you cannot make payments on your home, a bankruptcy filing will serve only to give you a brief reprieve from a foreclosure action. It does not matter if the house is your primary dwelling or your homestead. For more information about foreclosures and bankruptcy, please feel free to contact Savage, Combs & Villoch, PLLC, at www.savagelaw.us.