Both Chapter 7 and Chapter 13 bankruptcy filings involve an automatic order called the order for relief. This order includes an injunction, the automatic stay, which commands creditors to cease all collection activities until the bankruptcy proceedings are completed. In the case of foreclosure, this means that any proceedings currently underway in regard to your home must be immediately suspended. This can be great news in the short term if you are facing a foreclosure proceeding, as a Cincinnati bankruptcy lawyer can tell you; typically the process can be delayed up to four months, delaying the proceedings and allowing you to potentially keep your home after the bankruptcy filing.
Exceptions to the Automatic Stay
However, there are notable exceptions to the protection afforded by the automatic stay, so be sure to consult a bankruptcy lawyer before deciding whether filing is right for you. First and foremost, the mortgage holder has a legal right to file a motion to lift the stay, allowing the foreclosure sale to proceed as scheduled. This action still typically delays the proceedings by a couple of months, as it takes time for the lending institution to file its motion and more time for the motion to be approved.
If the mortgage lender has already filed the foreclosure notice, which typically gives the borrower three months’ advance warning of a pending proceeding, the automatic stay will still block the proceeding; but if enough time has elapsed, the lender may be able to file the motion to lift the stay sooner than you might like. For example, if the lender gave notice two months before your bankruptcy filing, they can then file the motion to lift the stay just one month after you have filed your Chapter 7 or 13, says a bankruptcy lawyer.