Myth: Filing Chapter 7 bankruptcy will stop foreclosure of my home and repossession of my car.
Fact: Filing Chapter 7 bankruptcy will delay, but not necessarily stop, a foreclosure or repossession. If you have significant arrearages, filing Chapter 13 bankruptcy may be the better option for you.
Will filing bankruptcy stop a foreclosure or repossession?
Once you file Chapter 7 or Chapter 13 bankruptcy, the court will issue an automatic stay which will stop your creditors from making any attempt to collect their debt, including attempting foreclosure of a home or repossession of a car.
However, it is extremely important to note that if you are behind on making your payments, filing Chapter 7 bankruptcy will delay but not permanently prevent a repossession or foreclosure. The automatic stay will expire approximately 60 days after your Chapter 7 bankruptcy case is filed. Only a Chapter 13 bankruptcy allows you to cure delinquent payments and keep your property.
Chapter 13 Bankruptcy Reorganization is the most typical type of reorganization bankruptcy used by consumer debtors and may be used to stop home foreclosures, car repossessions, IRS garnishments and levies.
You’ll want a lawyer’s advice to help you decide which form of bankruptcy protection is best for you. Under the new bankruptcy law, the automatic stay does not necessarily prevent repossession or foreclosure of your property after the dismissal of a case, so choosing the wrong time to file or the wrong way to file can ruin your chances of filing again when it is absolutely necessary. If you choose wisely, a bankruptcy lawsuit can be a quick, efficient way to get a fresh financial start.