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Does Bankruptcy Halt Foreclosure Even After the Bank Has Filed a Lawsuit?

Does Bankruptcy Halt Foreclosure Even After the Bank Has Filed a Lawsuit?
"""Although many homeowners view bankruptcy as a last-ditch effort to prevent the loss of a home, many are unclear as to how long they can delay to file and how it will impact the foreclosure lawsuit. Since the bank has already filed for foreclosure, they may assume that filing for bankruptcy will not have the desired effect of ending the lawsuit. Nonetheless, it is still possible to register and seek court protection even late in the foreclosure process.

Even though the bank is pursuing foreclosure in the local courts, homeowners who have recently been foreclosed on can still file bankruptcy to avoid losing their residences. The fact that the lender has filed a lawsuit to reclaim the property does not preclude homeowners from seeking protection through the federal bankruptcy court system. In fact, these types of collection endeavors are precisely what the bankruptcy laws were designed to protect borrowers from.

In essence, foreclosure proceedings are a collection effort by mortgage companies to compel homeowners to pay what they owe on the loan, or have their home sold by the county government to satisfy the mortgage if there is no other way to pay the debt. There is nothing else clandestine or fancy about the procedure, and it resembles a credit card company or other creditor suing debtors to collect a debt. The primary distinction is that mortgage debt is secured by the property, giving the bank greater ability to force the sale of the home.

Thus, householders can almost always file for bankruptcy to halt the foreclosure process until they no longer own the property. This typically means that the bankruptcy petition can be filed a few hours before the scheduled bailiff sale of the property, thereby preventing the foreclosure process from continuing. Obviously, it is preferable to file bankruptcy well in advance, but sometimes householders are working on a different solution that fails and must file an emergency bankruptcy.

The automatic stay goes into effect once a borrower files a petition with the bankruptcy courts, preventing lenders from continuing collection efforts. Because the entire foreclosure lawsuit is a collection effort, the mortgage company must suspend its efforts until the debt is resolved through bankruptcy, either through a payment plan or discharge. As expected, the majority of lenders do not want to deal with the additional hassle this causes, but they have no option but to delay the foreclosure.

Therefore, homeowners facing foreclosure or who have already been prosecuted by the lender will be able to file for bankruptcy and include the residence in the petition at any time prior to the sheriff sale. After the auction, when ownership is transferred to the new owner, it will be too late to use this option to halt the foreclosure, as the borrowers will no longer have an ownership interest in the property. However, if they own the property, they can seek bankruptcy court protection against the bank's collection efforts.

Although bankruptcy is typically viewed as worse than losing a property outright, homeowners who need more time to prevent foreclosure may wish to consider it as a last resort. Bankruptcy can always be used in self-defense to buy householders more time while they fight for alternative solutions or defend themselves against the lawsuit. Even if they are being sued by the lender for foreclosure, it is possible for debtors to file for bankruptcy unless they no longer own the property.

" - https://www.affordablecebu.com/

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"Does Bankruptcy Halt Foreclosure Even After the Bank Has Filed a Lawsuit?" was written by Mary under the Finance / Wealth category. It has been read 61 times and generated 0 comments. The article was created on and updated on 02 June 2023.
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