If you’re facing foreclosure proceedings, bankruptcy may be the last thing on your mind. But you should consider bankruptcy both your first option — and your last — if you are in foreclosure. One question I get asked all the time: Can Foreclosure Be Stopped Without Filing for Bankruptcy?
Bankruptcy Stops Foreclosure Proceedings
Chapter 13 bankruptcy offers you the opportunity to reorganize your mortgage debt and repay missed payments over a period as long as 60 months. You will need at least enough income to meet both the monthly payments plus some extra toward the missed payments. Or perhaps you only want to buy some time to find a buyer and sell the property. Bankruptcy provides that, too.
When you file for Chapter 13 bankruptcy, the court issues an automatic stay, which immediately stops all creditor actions, including foreclosure. The automatic stay immediately stops a foreclosure auction.
Mortgage companies incur most of the costs of a foreclosure auction up-front. These costs include attorneys fees, court costs, and publication expenses. As a result, mortgage companies have little incentive to stop the foreclosure process unless legally forced to do so.
Can Foreclosure Be Stopped Without Filing for Bankruptcy?
You have three options to stop foreclosure without filing for bankruptcy: reinstatement, modification or refinancing, or an emergency injunction.
Reinstatement. If you pay a lump sum amount equal to the arrearage, fees, costs, and interest incurred as a result of the default, you have reinstated your loan. Foreclosure cannot take place at that point. Getting current on your mortgage is a great way to stop foreclosure. Once your mortgage company reinstates your mortgage, simply resume your normal monthly payments.
Modification or Refinancing. Your best option for avoiding foreclosure is to pursue a mortgage modification. But you will only be able to obtain a modification if you act early enough in the foreclosure process. Your mortgage company will not grant you a modification if they have already gone through all of the trouble and expense of scheduling a foreclosure auction. Likewise, most people do not qualify for refinancing once they are in foreclosure.
Emergency Injunction. You could sue the mortgage lender and the substitute trustee and request a preliminary (emergency) injunction. Courts grant these types of injunctions only in very rare circumstances, and under no circumstances should you attempt to secure an injunction to stop a foreclosure without an attorney. In most cases, the quicker, easier and least expensive option is to avail yourself of the automatic stay injunction of bankruptcy.
Bankruptcy is the Only Surefire Way to Stop Foreclosure
You can stop foreclosure without filing for bankruptcy only if you take steps very early after default. If you have fallen behind on your mortgage payments, act quickly before your lender adds thousands of dollars of legal fees and costs to your bill by initiating a foreclosure.
Once a foreclosure auction has been scheduled, however, can a foreclosure be stopped without filing for bankruptcy? Not so much. If you are facing a foreclosure auction, you run a terrible risk if you do not file for bankruptcy prior to the auction. Bankruptcy is the only foolproof legal means by which to stop a foreclosure auction.
If you are facing foreclosure, contact an experienced foreclosure defense attorney immediately to discuss your options.