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Can I Stop a Foreclosure by Filing for Chapter 7 Bankruptcy?

Posted on in Foreclosure

Lake County foreclosure defense attorneyIf you have fallen behind on your mortgage payments to the point where you are in default on your loan, you may be facing the possibility of a foreclosure. You probably know that if your lender forecloses on your home loan, the house will be sold and the proceeds of the sale will go to the lender. Meanwhile, you will be left with no place to live and a serious mark on your credit history.

The reality is that many people who are facing foreclosure also have a large amount of other debt as well. Such debts often include credit card balances, medical bills, personal loans, and student loans. In cases like these, it is not uncommon for a person to begin thinking about filing for bankruptcy under Chapter 7 of the United States Bankruptcy Code. Filing for Chapter 7 bankruptcy could help you avoid foreclosure in certain situations, and experienced foreclosure defense attorney can assist you in exploring your available options.

An Automatic Stay

When you file for any type of bankruptcy, the bankruptcy court will immediately put a stay on all debt collections activities being pursued against you. This includes foreclosure proceedings, even if they have already been initiated by your lender. If your lender continues the proceedings once the stay has been enacted, the lender is in violation of federal law. Sanctions are possible in such cases. The stay is not permanent, however, and your lender can request that the bankruptcy court lift the stay and allow the foreclosure proceedings to continue.

Chapter 7 Bankruptcy

In Chapter 7 bankruptcy, the goal is to discharge as many of your debts as possible, and doing so may require you to sell any property of value during the process. Credit card debt, medical debt, and unsecured personal loans are usually eligible for discharge in Chapter 7, as is your mortgage debt. Unfortunately, discharging your mortgage debt does not mean that your lender cannot foreclose and take your home. When the automatic stay expires, the lender can restart foreclosure proceedings in an effort to recoup the loss from your discharged debt. The good news, if you can call it that, is that the foreclosure must start over from the beginning, which means you will have several months during which you can figure out what to do next.

Put simply, if you have a large amount of equity paid into your home, Chapter 7 is probably not the ideal strategy for preventing foreclosure. However, if you have no other options, a skilled lawyer can help you obtain the best possible outcome for your Chapter 7 bankruptcy.

Speak With a Libertyville Foreclosure Lawyer

If you are facing the possibility of foreclosure and bankruptcy, we can help. Contact an experienced Lake County foreclosure defense attorney at Newland & Newland, L.L.P. today. Call 847-549-0000 for a free consultation.

 

Sources:

https://www.washingtonpost.com/news/where-we-live/wp/2017/09/06/why-filing-bankruptcy-may-not-necessarily-stop-a-home-foreclosure

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

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