What You Need To Know About Bankruptcy And Foreclosure
If you’re facing the possibility of losing your home, you’re not alone—and you do have options. One of the most common questions we hear is whether bankruptcy can stop a foreclosure. The answer is yes, it can. Filing for bankruptcy puts an automatic stay in place, which temporarily stops foreclosure proceedings and gives you time to regroup.
Our Southfield, MI bankruptcy lawyer has worked with many people who thought foreclosure was unavoidable, only to find that bankruptcy gave them the breathing room they needed. Here’s what you should know about the relationship between bankruptcy and foreclosure.
How The Automatic Stay Works
The automatic stay goes into effect as soon as you file for bankruptcy. This legal protection puts a pause on all collection activities, including foreclosure, wage garnishment, and creditor calls. It doesn’t mean your mortgage debt disappears, but it does stop the foreclosure process while the bankruptcy case is active.
This stay gives you time to consider your next steps, whether that means catching up on missed payments, selling the home on your own terms, or working toward a longer-term solution.
Chapter 7 And Foreclosure
Chapter 7 bankruptcy is a liquidation option, which means it may not allow you to keep your home unless you’re current on your mortgage or can get caught up quickly.
If you’re behind on payments and want to surrender the home, Chapter 7 can discharge your obligation to pay the mortgage without you owing a deficiency balance. That can be a relief for many homeowners who no longer want to try to keep the property but want to avoid the long-term financial impact of a foreclosure on their record.
If you do want to keep your home under Chapter 7, the automatic stay may give you a few months of protection while you explore your options. However, unless you can bring your mortgage current, the lender may eventually ask the court to lift the stay to proceed with foreclosure.
Chapter 13 And Foreclosure
Chapter 13 bankruptcy is often the better option if your goal is to keep your home.
With Chapter 13, you enter into a repayment plan lasting three to five years. This plan allows you to catch up on missed mortgage payments over time while continuing to make your current payments. As long as you stick to the plan and stay current moving forward, you can stop the foreclosure and keep your home.
This option works well for people who fell behind due to a temporary hardship—such as job loss or illness—but now have the income to start repaying their debts. The bankruptcy court must approve your plan, and once it’s in place, your lender cannot move forward with foreclosure as long as you comply with the terms.
Can You Buy A Home After Bankruptcy?
Yes, it’s possible to buy a home after bankruptcy. Many people are able to qualify for a mortgage within two to four years after their case is discharged, depending on the type of bankruptcy filed and the loan program.
During that time, rebuilding your credit through consistent payments, low credit utilization, and financial stability will help improve your chances. Bankruptcy can actually be a step toward homeownership for those who are buried in debt and need a clean start.
Address Your Questions With Our Attorney
At Gudeman & Associates, P.C., we understand how stressful it is to face foreclosure. You may feel like you’re out of options, but bankruptcy may give you a way to reset and protect what matters most. If you’re unsure which type of bankruptcy is right for you—or whether it makes sense in your situation—contact us today. Schedule a consultation with our Michigan bankruptcy firm to learn how you can stop foreclosure and take control of your financial future.
