Can Bankruptcy Stop Foreclosure?

house for sale

Your mortgage lender may have contacted you, via letter or telephone, regarding your first missed mortgage payment. While you may have taken their notice necessary, you may be in a financial state that makes meeting these payments almost impossible. Unfortunately, your lender may mail you a 90-day pre-foreclosure notice after three or more missed mortgage payments. Follow along to find out whether filing for bankruptcy can stop a foreclosure on your home and how a proficient Rockland County foreclosure defense attorney at The Law Offices of Allen A. Kolber, Esq. can fight to keep you in your residence.

What is the New York Foreclosure Abuse Prevention Act?

In December 2022, New York State Governor Kathy Hochul signed the Foreclosure Abuse Prevent Act (FAPA). This Act now requires a mortgage lender to bring a foreclosure action forward within six years of its maturity date. Further, it holds that voluntary discontinuation of a foreclosure action does not reset the statute of limitations. Lastly, it states that a mortgage lender cannot seek a money claim against a homeowner if they have already started a foreclosure action to auction off their home.

Of note, FAPA may apply if you received a new foreclosure action on your home, have an existing foreclosure action pending for years, or have a mortgage lender who has started and discontinued multiple foreclosure actions for years. What’s more, if you can successfully apply FAPA to your case, you may also pursue a Quiet Title Action. This may essentially help you resolve title issues that may be preventing you from selling your home independently.

Can filing for bankruptcy stop a foreclosure on my home?

If you cannot successfully apply FAPA to your case, you may turn to a bankruptcy filing to stop a foreclosure action on your home. This may work because an automatic stay may be placed on your home immediately upon submitting your bankruptcy petition. An automatic stay is an injunction imposed against certain creditors (i.e., your mortgage lender) who want to start or continue taking action against you and your property (i.e., your home).

However, specifically for a Chapter 7 bankruptcy filing, this may only do as much as delay the foreclosure of your home by a few months. This is because the sale of your home may work to pay back other outstanding creditors for your non-dischargeable debts (i.e., certain taxes, family support obligations, etc).

On the other hand, a Chapter 13 bankruptcy filing may go as far as saving your home from foreclosure altogether. This is because, here, you may establish a three- to five-year repayment plan to catch up on your mortgage payments. You may even be able to reduce your monthly payments, reduce your interest rate, reduce your mortgage principal, or extend your mortgage by many years. All the while, an automatic stay may remain in effect.

There is no better time to act than now. So please reach out to a talented Rockland County foreclosure defense attorney at The Law Offices of Allen A. Kolber, Esq. at your earliest possible convenience.