Stopping a foreclosure by filing for bankruptcy
Can a foreclosure sale in Massachusetts be stopped by a bankruptcy filing? Yes. The reason for this is that as soon as a person files a bankruptcy petition, all actions to collect a debt, including foreclosure auctions are halted by the automatic stay provided for in the Bankruptcy Code. This is true even if the bankruptcy petition is filed hours before the scheduled auction (assuming you have not filed other bankruptcy petitions recently). Conversely, with a few extremely limited exceptions, a petition filed after the foreclosure auction cannot stop a completed foreclosure. The automatic stay also stops other collection actions such as telephone calls, lawsuits, garnishments, and letters.
In regards to foreclosures, the protection of the automatic stay is an opportunity to either sell the property or bring the mortgage current. That is because the automatic stay does not last forever. How long it lasts depends on the bank, which Chapter you file under, and what your goal is. If the intention is to sell the property quickly, then a Chapter 7 may provide the right avenue to do so, but depending on the situation, a Chapter 13 could be safer route. If goal is to bring the mortgage current, then a Chapter 13 bankruptcy is likely the choice because of the cure and maintain option in Chapter 13.
If you are not sure and time is short, then the case could likely be filed initially as an emergency Chapter 13, and then converted to Chapter 7 if necessary.
I have helped many local homeowners avoid losing their homes to foreclosure by utilizing the power of the Bankruptcy Code. Please contact me or make an appointment if you are in this situation and would like to learn more.