The Foreclosure Sale Is the Critical Dividing Line
The closer you get to the sale, the less room there is for mistakes, missing information, or unexpected problems.
Is there a specific deadline for filing Chapter 13?
The most important legal distinction is generally whether the bankruptcy petition was filed before the mortgage company completed the foreclosure sale under applicable state law.
U.S. Courts explains that Chapter 13 may be used to save a home from foreclosure because the automatic stay stops the foreclosure once the petition is filed. For the broader Chapter 13 explanation, see Does Chapter 13 Stop Foreclosure in Georgia?
But U.S. Courts also explains that the debtor may lose the home if the mortgage company completes the foreclosure sale under state law before the bankruptcy petition is filed.
“Before the sale” is a legal line, not a planning strategy.
Knowing that a bankruptcy generally must be filed before the completed foreclosure does not mean a homeowner should wait until the final hours to start the process.
Can I file Chapter 13 on the day of foreclosure?
A bankruptcy petition filed before the foreclosure is completed may trigger the automatic stay. If the sale is already on the calendar, also see what options may still exist after a foreclosure sale date is scheduled .
But treating the day of foreclosure as a routine filing deadline is risky.
A proper filing requires accurate information, required documents, credit counseling, court filing, review of prior bankruptcies, and evaluation of whether Chapter 13 is actually appropriate.
Computer problems, payment issues, incomplete information, prior-case problems, misunderstanding the sale time, or discovering that the sale has already occurred can completely change the result.
What happens when the Chapter 13 case is filed?
Filing a bankruptcy petition generally creates the automatic stay.
The Northern District of Georgia Bankruptcy Court explains that the stay automatically stops the commencement or continuation of most proceedings against the debtor or property of the bankruptcy estate.
Filing changes the situation immediately
When the automatic stay applies, several things change at once.
Does Chapter 13 just delay foreclosure?
Chapter 13 can do more than create a temporary pause when the homeowner qualifies and has a workable repayment plan.
One of its important features is that it may allow a homeowner to cure qualifying mortgage arrears over a reasonable period rather than paying the entire delinquency immediately.
But the homeowner generally must also continue making the mortgage payments that come due after filing.
A successful Chapter 13 strategy has to address what happens after foreclosure is stopped, including ongoing mortgage payments, Chapter 13 plan payments, and other financial obligations.
What if the mortgage company asks the court to continue foreclosure?
A mortgage creditor may ask the bankruptcy court for relief from the automatic stay.
The Northern District of Georgia describes a motion for relief from stay as a creditor's request for permission to take action that would otherwise be prohibited by the stay, including foreclosure.
Whether relief is granted depends on the circumstances.
What if I filed bankruptcy before?
This can be extremely important in a last-minute foreclosure situation.
Bankruptcy law limits the automatic stay in certain repeat-filing situations when previous cases were dismissed during the preceding 12 months.
Prior bankruptcy cases can change the automatic stay
Do not assume an old case does not matter. Recent dismissed cases can dramatically change what protection a new bankruptcy filing provides.
What if I file after the foreclosure sale?
That is a very different situation.
If the foreclosure sale was completed under Georgia law before the bankruptcy petition was filed, Chapter 13 generally cannot simply undo the foreclosure and return ownership of the home. Our post-foreclosure guide explains how the issues change after the sale.
U.S. Courts specifically warns that a debtor may lose the home when the mortgage company completes the foreclosure sale under state law before the Chapter 13 petition is filed.
Why not just wait until the last possible day?
Because determining whether Chapter 13 makes sense requires more than filing a piece of paper.
The attorney may need to review income, mortgage arrears, property equity, other debts, prior bankruptcies, tax issues, vehicle loans, household expenses, and the feasibility of a Chapter 13 plan.
Waiting can turn a careful legal and financial decision into a frantic attempt to beat the clock.
Earlier review gives you choices.
More time allows you to compare bankruptcy with modification, reinstatement, selling the property, and other options rather than using Chapter 13 only because the foreclosure sale is hours away.
What should I gather if the sale is approaching?
Our foreclosure document checklist can help you organize the information needed for an urgent review.
Start with the information that affects urgency
If the sale is close, tell the office the foreclosure date immediately and begin gathering the remaining information.
What should I tell the attorney first?
Start with four things:
- The exact foreclosure sale date.
- Whether you want to keep the home.
- Approximately how far behind the mortgage is.
- Whether you have filed bankruptcy before.
Those facts quickly identify some of the most important timing and automatic-stay issues.