If a debtor is behind in house or payments, can filing Chapter 7 bankruptcy stop a foreclosure or repossession from taking place?

Posted on November 14, 2013. Filed under: Chapter 7 Bankruptcy, Consumer Bankruptcy Attorney | Tags: , , |

foreclosure

Whenever any bankruptcy case is filed, the creditors are usually stopped from taking action to collect the debts that were owed at the time of the bankruptcy. This feature of bankruptcy is called the “automatic stay.” The automatic stay, if it applies, stops a foreclosure or repossession from going forward. However, no bankruptcy filing allows a debtor to keep property that is security for a loan without making payments on the loan. For example, debtors with home mortgages and car loans, cannot keep their homes and cars without making payments. As soon as the bankruptcy case is closed, the automatic stay terminates, and the creditor can proceed with foreclosure or repossession. Moreover, if the debtor is not current on payments, creditors may ask the court to terminate the automatic stay while the bankruptcy is still pending, and, in Chapter 7, creditors are usually able to terminate the automatic stay. In order to keep property that is security for a loan, a debtor often must enter into a “reaffirmation agreement” with the creditor who holds the lien on that property.

photo credit: JefferyTurner via photopin cc

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