Declare Bankruptcy to Stop Property foreclosure, Even if The Bank is Already Suing You

By MyVine | October 30, 2011

Though many homeowners look at bankruptcy as 1 of the last alternatives to prevent losing a property, several seem unclear on just how late they are able to wait to file, and how it will have an effect on the foreclosure lawsuit. They may believe that, considering that the bank has already sued for foreclosure, filing bankruptcy might not have the desired result of ending that lawsuit. Nonetheless, it is still possible to file and seek protection of the courts even late into the process of losing the residence.

Homeowners who have recently been foreclosed on can nonetheless file bankruptcy to stay away from losing their homes despite the fact that the bank is pursuing foreclosure within the local courts. Just simply because the lender has initiated a lawsuit to take the home back does not mean that homeowners are unable to seek protection by means of the federal bankruptcy court system. The truth is, it’s precisely these sorts of collection efforts that the bankruptcy laws had been set up to defend borrowers against.

Basically, foreclosure proceedings are a collection attempt by mortgage businesses to force homeowners to pay what they owe on the loan, or have their house auctioned off by the county government to satisfy the mortgage if there’s no other way to pay the debt. There is certainly nothing else secretive or fancy concerning the approach, and it’s small different from a credit card business or other creditor suing borrowers to force payment of a debt. The main difference is that the mortgage debt is secured by the property, so the bank has additional of an capacity to force the sale with the house.

Therefore, homeowners are pretty much usually able to file bankruptcy to stop foreclosure up until the time that they are no longer the owners with the residence. This usually means that they’re able to wait until just several hours just before the scheduled sheriff sale with the property to file the bankruptcy petition, and this can stop the foreclosure approach from getting able to continue. Naturally, it’s much better to file just before the really last minute, but at times homeowners are working on one more remedy that falls through and should file an emergency bankruptcy.

Once a borrower files a petition with the bankruptcy courts, the automatic stay goes into impact, which precludes lenders from being able to continue collection efforts. Simply because the entire foreclosure lawsuit is usually a collection effort, the mortgage corporation will need to put its approach on hold until the debt is resolved via bankruptcy, either via the payment plan or a dismissal. As could be expected, most lenders do not particularly would like to cope with the added hassle this causes, but they’ve no other choice than to put the foreclosure on hold.

So homeowners who are facing a foreclosure or have already been sued by the lender is going to be able to file bankruptcy and incorporate the home within the petition anytime until the sheriff sale. Soon after the auction, when ownership is transferred into the name with the new owner, then it will be too late to rely on this option to stop foreclosure, since the borrowers no longer have an ownership interest within the property. But as long as they do have title to the property, they are able to seek protection in bankruptcy court against the bank’s collection efforts.

Although bankruptcy is usually regarded as to be small better than losing the house outright, owners may wish to keep the idea of filing as a last ditch effort if they require far more time to quit foreclosure. Bankruptcy can usually be applied in self-defense just to purchase far more time, even though homeowners fight for other solutions or defend themselves against the lawsuit. Unless they no longer own the house at all, it really is achievable for borrowers to file bankruptcy even if they are getting sued by the lender for foreclosure.

Topics: Buying Tips, Financing, Foreclosures, General, Investing, Selling Tips | Comments Off

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