Can You Use Bankruptcy to Stop Foreclosure Proceedings? If So, How?
You’ve lost your job because of the pandemic and you’ve fallen behind on your bills. You jump every time the phone rings, and you get nervous when the mail arrives, fearful that you’ll have to talk to yet another creditor or read yet another threatening letter. You’ve missed a mortgage payment (or more) and the bank has either initiated foreclosure proceedings or is threatening to do so. It seems that your best option to move forward and get a fresh start is through a bankruptcy filing. But will a bankruptcy petition prevent a foreclosure?
Bankruptcy and Foreclosure Proceedings
In most instances, filing for bankruptcy won’t make a foreclosure proceeding go away, but will only suspend it. That’s because most debtors who want to try and keep their home after bankruptcy seek protection under Chapter 13, rather than Chapter 7. With a Chapter 7 filing, you can permanently discharge the debt you owe, but, in exchange for that right, you must relinquish certain property to the bankruptcy court, to be sold to satisfy your creditors.
In most states, there are significant limits on the amount of equity you can protect in your home when filing a Chapter 7 bankruptcy petition. In Texas, however, you can protect an unlimited amount of equity. Nonetheless, even if you have the debt discharged on your home, the discharge won’t extinguish the lien held by the bank on your property.
Typically, when you file for bankruptcy protection, the automatic stay goes into effect immediately, preventing creditors from initiating or continuing legal action, such as foreclosure proceedings. However, a creditor may petition the court to lift the stay with respect to your home, so that foreclosure proceedings can move forward.
Contact an Experienced Rockwall, TX Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
