You’ve probably heard a lot about bankruptcy. Most are aware that homeowners in financial trouble can often turn to bankruptcy protections to save their homes from foreclosure. But many in this situation worry that they may not have enough time to stop the foreclosure proceedings. When is it too late to file bankruptcy and stop a lender from foreclosing on your home?
When Is the Absolute Latest You Can File Bankruptcy to Stop Foreclosure?
The shortest answer is that you can file bankruptcy to fight a home foreclosure right up until the day of the sale. It’s not over until it’s over (and by over, we mean the foreclosure is complete, and the property sold).
What is the Expected Sequence of Events in a Home Foreclosure?
A typical foreclosure starts with the lender sending the borrower a notice of default. When a homeowner receives the notice of default, they still have an opportunity to repay the delinquent balance and rehabilitate the loan according to a deadline set by the lender. If the borrower does not pay the delinquent balance by the deadline, the lender proceeds with foreclosure. A foreclosure typically starts about 90 days after the last payment. After 120 days have passed, the lender is required to issue a notice of intent to sell before they sell the home at a public auction. As long as the deed is not transferred to someone else, the foreclosure can be stopped at any time, including the date of the foreclosure sale.
Declaring Bankruptcy Immediately Delays the Foreclosure Sale:
When a bankruptcy petition is filed, the court immediately issues an injunction called the automatic stay. The automatic stay prevents all further creditor collection activities, including foreclosure. For this to work, you must be able to repay the past due amount, costs of the foreclosure, and meet future mortgage payment requirements on the house. Declaring bankruptcy puts the automatic stay in place for the duration of the bankruptcy and immediately stops the sale, but it does not stop the foreclosure. It stalls the foreclosure sale.
In some cases, the creditor will request that the court lift the injunction. The court may grant the request if they can show that the homeowner has no intention of making payments on the home or that the homeowner does not have the financial ability to make the required payments. The court may lift the automatic stay, but the homeowner still bought some time.
If you are facing a home foreclosure, you have options, and we can help. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one in the Chattanooga area with two. Please get in touch. You are in good hands with Kenneth C. Rannick P.C.