Can I Face Foreclosure After I Have Filed For Bankruptcy?
The relationship between foreclosure and bankruptcy can be complicated. Many debtors in South Florida have heard that filing for bankruptcy can stop the foreclosure process from moving forward. In addition, debtors who are considering filing for Chapter 13 bankruptcy may be considering it in order to stop a foreclosure and to catch up on mortgage payments. To be clear, Chapter 7 bankruptcy and Chapter 13 bankruptcy have very different results for a debtor who is facing foreclosure and considering bankruptcy. At the same time, both types of bankruptcy do initially halt the foreclosure process. Given that the relationship between bankruptcy and foreclosure can be complicated, our West Palm Beach bankruptcy attorneys know that you have questions. Most immediately, you may be wondering: can I face foreclosure after I have filed for bankruptcy? Our attorneys have more information for you.
All Bankruptcy Cases Have the Automatic Stay
First, if you are trying to learn more about bankruptcy and foreclosure, or if you are wondering whether you can still face foreclosure after you have filed for bankruptcy, you should learn more about the automatic stay. The automatic stay is an injunction that stops creditors from going forward with any debt collection actions and related steps, and it applies as soon as a debtor has filed for bankruptcy. Accordingly, as soon as you file your bankruptcy petition and any other required materials, the automatic stay will stop a foreclosure that is in process, and it will also prevent a lender from initiating a foreclosure.
However, what happens after you file for bankruptcy and the automatic stay initially stops a foreclosure will depend on the type of bankruptcy you are filing for and whether the lender tries to have the automatic stay lifted.
Chapter 7 and Chapter 13 Bankruptcy Have Different Effects on Foreclosure
You should know that Chapter 7 bankruptcy and Chapter 13 bankruptcy cases have different effects on foreclosure processes. Given the nature of a Chapter 13 bankruptcy case — a type of reorganization bankruptcy — a debtor can rely on the automatic stay to stop a foreclosure, and then the debtor can get back on track with their mortgage payments through the repayment plan required of any Chapter 13 case. As such, in a Chapter 13 bankruptcy, a debtor can halt the foreclosure process and ultimately remain in their home.
Yet in a Chapter 7 bankruptcy case, the debtor does not have an opportunity to reorganize debt and catch up on mortgage payments. Since Chapter 7 is a type of liquidation bankruptcy, the debtor cannot remain in a home that is facing foreclosure. The automatic stay will initially stop the foreclosure, but the debtor should not expect to keep the house.
How Creditors Can Lift the Automatic Stay
When you file for Chapter 7 bankruptcy, U.S. bankruptcy law allows the creditor to ask the court to lift the automatic stay so that the foreclosure process can move forward. This does not happen in all Chapter 7 cases, but it is not entirely uncommon.
Accordingly, if you file for Chapter 7 bankruptcy, you can expect the automatic stay to initially stop a foreclosure, but you should know that the foreclosure ultimately may occur during your bankruptcy case.
Contact a West Palm Beach Bankruptcy Lawyer
If you have questions, one of the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller can help.