Can Foreclosure Be Stalled By Filing Chapter 7 Bankruptcy?

by Susanne Robicsek, North Carolina Bankruptcy Attorney

June 13, 2012

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Should you file Chapter 7 bankruptcy if you want to stall a foreclosure?    Filing for Chapter 7 bankruptcy can stall a foreclosure and it may give someone additional time for someone to stay in their home  but there is no way to say how long.   So the long answer would be to say is that it may or may not.  . . and the short answer is “yes” it can, but it might not (for long).

Additionally, you might wish it hadn’t.

Losing a home and moving can be traumatic and bankruptcy might help make the process easier.  It may be accomplished by Chapter 7, though 7 is not designed to stop foreclosure permanently.  Chapter 13 usually does a better job to stop the foreclosure and it allows time for the homeowner to catch up missed payments, reduce other debts, and might even buy time until a mortgage is modified.

Yes, filing a Chapter 7 bankruptcy can temporarily stop the process but how temporary depends on the creditor and how fast they move. If a temporary delay can help then this might be the right choice for some and it may surprise many to learn how long some mortgage lenders take to enforce the foreclosure rights.  Many do nothing for a long time, even if they were hot on the trail of the borrowers right up until the case was filed.

Even some of the creditors who quickly file a Motion for Relief from Stay to get the property out of the bankruptcy may move as slow as a snail on the state foreclosure.   Once they get the stay lifted, it is  completely up to them whether to resume the state foreclosure action again, and when.

Because there is no way to be sure what a lender is going to do, there isn’t really a way to answer the question how long someone has in their home.  To truly answer whether it WILL (which is what the person really wanted to know) I would need a [working] crystal ball.For clients facing this situation, I will play it by ear.  When to file is sometimes as much of an issue as whether or not to file a bankruptcy.  As we move forward with the paperwork, I normally keep an eye on the process and tell my clients that if they receive foreclosure papers from the creditor, to let me know.It might seem like a good idea to try to get “just a few more months” in the house.  Maybe you want the kids to finish out the school year, or maybe you don’t want to have to move more than once.

However it seems that I am seeing as many problems coming from homes that are NOT foreclosed upon as I see coming from the foreclosures themselves.  If a property is not foreclosed and the client moves out, it may be left in a client’s name for a long time.   Vacant properties don’t sell as well, and the worse it gets the less incentive the bank will have to foreclose.

If a client plans to move away from our city, I sometimes recommend they they make no attempt to delay the foreclosure.  We want to get the property out of the clients’ name.

As long as they are record owners, they have to deal with ongoing owner duties such as property taxes, municipal ordinances (upkeep), homeowners dues if applicable, not to mention the headache of vacant properties in general.  If the clients have left town, this can present quite a burden without someone trustworthy to look after the property or rent it to cover the ongoing expenses.

Some clients describe the period waiting for the lender to foreclose as very stressful.  They say they are in limbo.  They know they are 30-60 days from having to move.  They can’t make many plans in advance, but they have to be prepared to jump once the creditor moves forward.  Moving twice may be a much smaller headache in the long run.

So in light of what I see in the present housing market, I am more worried about the property remaining in someone’s name if they want to move, than I am in stalling a foreclosure for a few months longer.

I note that whether or not you have a home with a mortgage can also affect your ability to pass the means test or not, so this issue needs to be discussed with an experienced lawyer who can discuss what is the best option for you.

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Concentrating in Consumer Bankruptcy Law since 1988; Wake Forest Law School JD 1987 Law Office of Susanne M. Robicsek since 1993, Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.

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Last modified: August 20, 2013