Bankruptcy will stop a foreclosure fast. But there are very good reasons to get your ducks in a row early.
Stopping Creditors in General
In the last blog post we made clear that you don’t necessary have to actually file your bankruptcy case before you can get certain kinds of relief from the actions of your creditors. Your attorney can often stop certain bad things from happening to you immediately, sometimes even during your first meeting with him or her. And the attorney may be able to prevent some creditor actions from occurring in ways that could really benefit you, in the short run and the long run.
At the end of that blog post we said the second step in stopping creditors is to file the bankruptcy itself. That creates the “automatic stay,” your protection against just about all the possible kinds of collection actions any creditor could take against you. Because there are a lot of questions about how the “automatic stay” works in practice, we’re going to look at how it stops, or protects against, specific creditor actions, starting with home foreclosures.
Stopping a Home Foreclosure
A bankruptcy filing stops a home foreclosure immediately. Simple as that.
Stopping It in Time
Of course life, and the law, are seldom that simple.
Right off the bat, just because bankruptcy’s “automatic stay” works so quickly, you still want to see an attorney about your situation earlier rather than later. For many reasons:
- This is not something you want to mess up. You don’t want to cut it too close.
- When is “on time,” and not “too late” depends on the kind of foreclosure (for example, judicial or non-judicial) and your state’s laws about it. You want to have good advice about this, way before it’s legally too late.
- Bankruptcy has so many aspects that are a matter of timing. Having some flexibility in when your case is filed—instead of being filed quickly out of necessity—can often benefit you greatly, potentially a difference of thousands of dollars or some other very important benefit.
- The best timing of your bankruptcy filing often turns on what your goals are with your home and what is doable under the law. The advice you get from your attorney will get you the best game plan for what you want to accomplish. It’s usually much better to be able to execute that best game plan instead of just being stuck with filing the bankruptcy with timing that is forced on you.
The Next Questions
Stopping the foreclosure is the immediate problem to be solved, but it begs other questions:
- If you want to keep your home, do you need a Chapter 13 “adjustment of debts” instead of a Chapter 7 “straight bankruptcy”?
- What kind of bankruptcy do you need if you’re surrendering the house but need extra time to get ready to move?
- What if you aren’t sure if you can afford to keep your home but would like to try?
- Is there a way to use bankruptcy to give you more time to close a pending sale?
- Is there a way to use bankruptcy to protect and then sell the house at some point 3, 4 years from now, when you want to downsize anyway?
Or putting it another way, how can you keep the “automatic stay” protection long enough to do what you want to do with your house?
We’ll be answering these kinds of questions in the next few blog posts.
