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How Long Does Bankruptcy Keep a House Out of Foreclosure?

Depending on the type of bankruptcy a person files, and the unique financial situation of that individual, bankruptcy may temporarily or permanently stop a home foreclosure.

While filing bankruptcy can put a temporary halt on foreclosure proceedings, many homeowners may be able to catch up on overdue mortgage payments during the bankruptcy process, ending their foreclosure altogether.

To learn more about the effects of bankruptcy on your foreclosure, fill out the form below to connect with a local bankruptcy attorney for a free consultation.

The Immediate Benefits of Bankruptcy on Foreclosure

If you're wondering exactly how long bankruptcy keeps a house out of foreclosure, the first thing to address is the automatic stay.

When a person files for Chapter 7 or Chapter 13 bankruptcy, the automatic stay immediately stops a foreclosure proceeding. Here's how this works:

  • The automatic stay usually forces creditors to stop collection actions against you, often including foreclosure of your home.
  • Even if your home is scheduled for a foreclosure sale, this action must usually be postponed for at least a few months.
  • Creditors may file a motion to lift the stay to avoid the automatic stay, though even if they are successful, the bankruptcy court may take several months to consider the motion.

So, in both types of personal bankruptcy, foreclosure could at least be temporarily halted. By filing for Chapter 13, however, some people may be able to completely save their homes from aggressive creditors.

Long-Term Foreclosure Prevention Offered by Bankruptcy

By filing for Chapter 13 bankruptcy, people in debt are able to gather most of their debts into a single repayment plan.

Over the course of a few years, filers make regular monthly payments to a trustee, who then distributes the money to creditors. As a result, after about three to five years, a filer may be able to:

  • Catch up on overdue mortgage payments
  • Eliminate the creditor’s need for foreclosure
  • Free up money for future mortgage payments

Thus, in some circumstances, Chapter 13 can stop foreclosure indefinitely, provided a homeowner keeps up on mortgage payments after the bankruptcy process is completed.

Of course, Chapter 13 is not the only way to prevent foreclosure. If you feel you cannot make the monthly payments required by Chapter 13, Chapter 7 bankruptcy may still be able to delay foreclosure temporarily.

In addition, filing for Chapter 7 may allow filers to eliminate their unsecured debts, including credit card debt, medical bills and payday loans.

By discharging these debts, many filers may find they have more cash available to make a down payment on a new mortgage or lease, allowing them to transition into new housing after their foreclosure.

As you can see, judging how long bankruptcy will keep a house out of foreclosure depends on a number of different variables.

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