Bankruptcy and foreclosure are terms that can not be grasped by the ordinary citizen. Bankruptcy can, however, become a tool that can help you protect your house in the face of foreclosure.
The Electronic Residence provision in the Bankruptcy Act prohibits some forms of debt settlement actions by creditors, including claims, defaults, foreclosures, expulsions, and judicial proceedings. The automatic stay shall take place when you file the bankruptcy case, except in exceptional cases (see below).
Since borrowers tend to wait until the last minute, foreclosures often occur shortly before the planned auction date. It was also a battle against the court in the past: the bank clerk rushed to the district court to sell the mortgage, and the borrower’s lawyer rushed to the federal bankruptcy court. It’s a customer. It’s a customer.
Today, this race is not so hectic. Lenders may need to be in court to sell, but most bankruptcies are made online. Although the auction may take place, a bankruptcy petition would put an end to any sales that the bank holds as much as the debtor has lodged a bankruptcy case (or, in some cases, a debt collection declaration in the county land registry) before the selling of the mortgage takes place.
Bankruptcy in Chapter 7 and Chapter 13 will cause an automatic stay and avoid foreclosure. However, the resolution of the case referred to in Chapter 7 only provides for temporary relief until the stay is lifted after the proceedings have been completed by the court, normally four to six months after the filing. For a more lasting solution, you could file a case for Chapter 13.
People have used self-indulgence in the past to prevent the lender from carrying out foreclosures twice. The lawmaker has tightened the bankruptcy rules so that automatic defaults for creditors of more than one case per year are not so automatic. The new method is operating like this:
If you apply for bankruptcy less than one year after the previous case, automatic stays will only be effective for 30 days, unless the judge approves the extension. If a new bankruptcy case is filed in the previous year, when all cases were pending, the automatic residence will not be applicable until the court agrees to impose it.
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