Is it possible the bank will never foreclose on my house?
Foreclosures can be halted during bankruptcy, but only until a case is concluded.
People who are in severe financial difficulties may believe that filing bankruptcy will prevent a foreclosure on their home. The answer is that bankruptcy is a temporary fix for a foreclosure problem, and one that shouldn't be considered a long-term solution.
"Foreclosure is not a good thing for you or for your lender. It is a complicated process that involves many legal and tax issues," according to Bills.com. "It is important for you to understand the types of foreclosure, how the process works and how it can affect you."
When they are no longer able to make their mortgage payments, many individuals decide to file a Chapter 13 petition in U.S. Bankruptcy Court rather than Chapter 7, the most common form of personal bankruptcy. That helps to stave off foreclosure of their home because in Chapter 13 cases, the debtor must pay back creditors through a court-ordered repayment plan that lasts three to five years. During that time, a foreclosure is put on hold along with other collection efforts and lawsuits by creditors.
In a Chapter 7 case, the court doesn't allow an individual to keep their assets, but most exemptions allowed under state and federal law are large enough to cover a secured debt, such as a house mortgage a car loan. However, if the item's value is greater than the exemption, the debtor may have to sell the property to pay their debt since the court won't discharge it in the bankruptcy, according to BankruptcyHome.com.
Also, since Chapter 7 cases are generally concluded within a few months, the amount of time that the foreclosure is halted is much less.
Even under Chapter 13, a secured loan such as a mortgage will not be discharged by the court when the case is over. But it does enable the individual to reorganize their debts over a longer period of time and perhaps end on a financial footing that will allow them to own a home without the threat of foreclosure.
While it's impossible to say whether a home is forever safe from foreclosure, homeowners who have not recovered sufficiently from their debts after a Chapter 13 case is concluded may file another Chapter 13 bankruptcy petition as long as two years have elapsed. Once again, the home would be protected by the court against creditors, but only for the time it takes to complete the repayment plan.