How Late is Too Late to Stop a Foreclosure?

by Dana Wilkinson, Attorney at Law

September 26, 2007

A frequent topic of discussion with prospective clients is the timing of a Chapter 13 bankruptcy filing in order to stop a foreclosure. How long do you have before it’s too late to stop a foreclosure, or how late is too late?

In general, a bankruptcy will stop a foreclosure if it is filed while you are still the property owner. When that “foreclosure” of your ownership rights takes place varies from state to state, because state laws differ with respect to when the foreclosure process terminates your property rights. South Carolina, where I practice, is a full judicial foreclosure state, meaning that a lawsuit must be filed and a hearing held prior to a foreclosure sale. As a practical matter, it may take months to complete a foreclosure in South Carolina. In neighboring Georgia, on the other hand, non-judicial foreclosures are the rule, and don’t take nearly as long.

It is important that you know how much time you have, in order to make informed decisions about all kinds of issues. No matter what steps you are taking in order to avoid losing your home–applying for refinancing, talking to your lender’s loss mitigation department, trying to borrow from your 401k plan, for example–you need to know what the process of foreclosure is like and how much time you have. Whatever the process in your state, once your rights in the property have been terminated, a Chapter 13 will no longer stop the foreclosure process.

When I see a prospective client with a foreclosure pending, I will usually give that person a deadline to return the paperwork and fees necessary for me to start a bankruptcy filing. Filing a Chapter 13 requires a certain amount of lead time. The burden of preparing the necessary paperwork is significant. Not only is it difficult, if not impossible, to accomplish in an afternoon, it’s not a good idea to try. I can’t get the information I need, and you can’t gain an understanding of the process, without taking a bit more time. In addition, filing a bankruptcy on the very eve of foreclosure increases your costs–you are going to pay the mortgage company’s attorney fees and court costs, and those are getting higher every day. Finally, last minute filings just annoy people, and they may be people with whom you need to have a decent working relationship.

In most counties in South Carolina, foreclosure sales are scheduled for the first Monday in the month. At the end of every month my office fields phone calls from people whose property is scheduled for foreclosure sale, and every month we have to turn people away because we simply don’t have time to see them, prepare the necessary paperwork, and do all the things we have to do to file a Chapter 13 case. Every other bankruptcy attorney I know gets the same phone calls, and turns those same people away. You may have until the hammer falls at a foreclosure sale to file a Chapter 13 to stop that sale, but don’t wait to find out, and don’t wait to prepare. While you are exploring other options, consult an experienced bankruptcy attorney to find out what you’ll need to do, and how much you’ll need to pay, just in case a Chapter 13 turns out to be your best (or only) option. Just like in scouting, it pays to be prepared.

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Däna (pronounced "Donna") Wilkinson, has been a bankruptcy lawyer in South Carolina for 20 years. She is certified as a bankruptcy specialist by the South Carolina Supreme Court.

Last modified: October 22, 2012