Can a Lender Foreclose if You've Filed Bankruptcy Recently?

Bankruptcy and foreclosure laws are both complicated and confusing, and it gets even more complicated when you are dealing with both. The effect your bankruptcy will have on foreclosure, if any, depends on the type of bankruptcy as well as the timing.

First let's talk about the timing. Going through bankruptcy only affects the debts you have at the time of the bankruptcy. If you incur more debts, such as a new mortgage, after your bankruptcy was filed, those debts are subject to the terms you agreed on when you took on the debt.

In other words, yes your mortgage holder can foreclose regardless of whether you have a past bankruptcy on your record no matter how long it has been. If it has not been long enough since your bankruptcy that you can file again, there is no way you can use bankruptcy to stop your foreclosure.

When You Can Use Bankruptcy to Stop Foreclosure

On the other hand, if it has been long enough since your bankruptcy that you can file again, you may be able to use a bankruptcy to stop foreclosure and save your home. However, you will not be able to you this tactic if your bankruptcy is recent.

If it has been long enough and you want to try to use bankruptcy to file for foreclosure, you will need to file for chapter thirteen, not chapter seven. Chapter seven can delay a foreclosure but it doesn't stop it. Chapter thirteen allows you to come up with a repayment plan that may enable you to keep your home.

You can file for bankruptcy under chapter thirteen two years from the filing date of a previous chapter thirteen filing. If your previous bankruptcy was a chapter seven, then you need to wait four years after the filing date. Your previous bankruptcy must be discharged before you can file again. Regardless of how long the case has been open, you can't have two bankruptcy cases going at the same time.

If you have a history of repeatedly filing for bankruptcy in order to stop a foreclosure or other debt collection and then having the bankruptcy dismissed once you've won yourself the time you needed, you may not be able to get a stay to get foreclosure proceedings halted during the bankruptcy process. If you had a chapter thirteen bankruptcy filing that was dismissed within the last year, the stay will only be for 30 days. If you have had two chapter thirteen cases dismissed in the past year there will be no stay at all. If the case that was dismissed was a chapter seven, you can still have the full stay when you file chapter thirteen.

Get Your Debt Under Control

Bankruptcy is meant to be a last resort for people who are drowning in debt, not a quick fix. That's why time limits apply to having your debts discharged by bankruptcy. If you find yourself needing to file for bankruptcy repeatedly for any reason other than an unavoidable and unforeseeable emergency, it's time to reevaluate your financial situation and take steps to change your spending habits.

If you are having trouble keeping up with mortgage payments, it may be possible to get a bad credit refinance to lower your payments. However, if you don't have much equity you may find that you are unable to save money on your monthly payment by refinancing.

Disclosure

I am not a lawyer; I'm just a writer. This is not intended to be construed as legal advice. If you want to discuss the specifics of your case with someone, you should contact an experienced bankruptcy lawyer.

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Comments 14 comments

lucy in FL 5 years ago

A year ago my home was discharged in Chapter 7 bankruptcy. The house is listed on my credit reports as included in bankruptcy, so I checked with the attorney who confirmed that I am no longer legally responsible for the mortgage but, of course, if I stop making payments the bank can foreclose. From what I've read, I am probably one of the few people who have been successful in getting a loan modification under HAMP. However, the modified amount is only approx $300 less than my original mortgage amount. My house is currently worth about $55,000 less than what I owe. I am thinking of letting it go to foreclosure as I am divorced and the only source of income. Each month I have barely enough to make the mortgage payment and other necessary bills - electric, water/sewage, auto insurance, dr bills, etc. In fact, I have to "get creative" by selling old jewelry for gold, having a garage sale, bringing clothes to consignment, borrowing from relatives,etc. to make ends meet. I'm pretty much out of other ideas along those lines. In the meanwhile, my 18-yr-old daughter is in need of a cheap but reliable car to get back & forth to school and work -- which I can't afford. I'm seriously considering letting it go. Would this have a further negative impact on my credit since my home is already reflected on my credit as part of bankruptcy?


michelle 5 years ago

i have a question we filed bankrupty last yr also our house went in to foreclosure now the loan services that gave us our mortage wants us to pay taxes on $200k can they do that, The house was worth $300k they sold it for $100 in a short sale.


bethparker profile image

bethparker 5 years ago from Grant, MI Author

@lucy: Yes, having a foreclosure on your credit will further damage your credit rating.

@michelle: The form you receive from the mortgage company just shows what was reported to the IRS. Talk to a tax attorney or a good accountant before you file your taxes to find out whether you have to pay taxes on the difference between the sale price and the value of the home.


lucy in FL 5 years ago

Thank you for getting back to me so quickly! In looking over my submission, I realize that my question is really that I can't see being able to make my mortgage payments for the long haul (maybe a year or 2 the most), and also won't see equity in it if I try to sell down the road. Would I be better off biting the bullet now since bankruptcy has already taken its toll on my credit rating? and that way be able to afford taking care of other necessities (for my daughter, etc.) Thanks for your time and consideration~!


bethparker profile image

bethparker 5 years ago from Grant, MI Author

@lucy, I would try to hang in there unless you are absolutely certain you won't be able to pay the payments. If you think you can keep up for another year, that gives you a year to try to find a better-paying job or find a way to make extra money in your spare time (try writing for Hubpages--works for me!). Good luck to you, whatever you decide to do. :)


Dennik 5 years ago

If our house was given back to the bank as part of Chapter 7 Bankruptcy (releasing us financially from the house) does our name still remain on the deed until it is foreclosed and does that foreclosure go against our credit although Bankruptcy was discharged?


ForeclosureDJens profile image

ForeclosureDJens 5 years ago from South Carolina

@lucy: It sounds like you Ch.7 Bankruptcy Attorney did not challenge the mortgage debt in the bankruptcy. In most Bankruptcy cases, lawyers do not, even though they should. If your mortgage debt was properly challenged as "unsecured debt" you would have had an opportunity during your bankruptcy to challenge the validity of lender and if they actually held your mortgage. It is becoming all too common over the past 10 years that the current bank or lender claiming to hold your mortgage does not actually hold it or have the right to enforce it and foreclose.

I suggest to have a bankruptcy malpractice attorney take a look at your bankruptcy again... see if there are any obvious actions your lawyer took that they shouldn't have or things they should have brought up. I personally know a few people who have opened up their bankruptcies again because their mortgage debt was not challenged as "unsecured debt" when it should have.

Hope that helps!


Captain Spaceman profile image

Captain Spaceman 5 years ago from Manhattan Beach

Geeze, for not being a lawyer you sure do know your stuff, Thank you for that.


Lee 5 years ago

1st filing = 60 days automatic stay

2nd filing = 30 days automatic stay

3rd filing & after = 0 days automatic stay

You need to get an extension from the judge to have the automatic stay extended. It depends on what you were trying to do and they will determine if it was good faith or not.


Kim 4 years ago

I'm looking for help and cannot afford an attorney.

I filed bankruptcy in 2008. It was discharged in 2009. I included my mortgage and at the time I thought I was going to reaffirm on it and keep my house. Since then I lost my job and fell extremely behind on my mortgage. Now the bank is trying to foreclose. I called my lawyer from the bankruptcy and asked if the house was reaffirmed on and I guess it never was for whatever reason. So she told me legally that since the house was included the bank cannot come after me for any money owed on the house, but I'm assuming they can still foreclose on it? How does that work since it's already been included in a bankruptcy?

I'm going to a foreclosure prevention hearing this week in hopes the bank will work w me to keep the house, but if they don't I'm afraid that will leave me w less time until they can take back the home since it's already been filed in a bankruptcy as opposed to going through the foreclosure process? In other words, how long am I looking at if they will not work with me and go forward w the foreclosure?


Mandi 4 years ago

We filed chapter 13 in 2009 and are currently still making our bankruptcy payments. We have fallen behind by almost a full 7 months on our mortgage even though we still have been paying the monthly payments when we can . We got so behind because my husband has had to have surgery and go to the doctors a lot with no health insurance. Now I just received a letter in the mail from the mortgage company about them filing a contested matter/ movant??? I am confused on what's going to happen but I'm thinking foreclosure... If so is there anyway to prevent this???


tom 4 years ago

my house under water and the septic tank is on some elses porperty very expense to hook to city and no money to do this is bankurpce the way to go


monicamelendez profile image

monicamelendez 4 years ago from Salt Lake City

I feel really bad for those who end up in these tough situations. It seems like so often it is for health reasons and my heart goes out to all of you in this situation. Bless you all.


Mari 3 years ago

We filed Chapter 7 bankruptsy almost 2 yrs ago and our house is just now going into foreclosure. We are moved out and renting a home. Our lawyer told us we were responsible for the ins. coverage on the home until it was sold. The ins. has been canceled and now we cannot get anyone to give us homeowner ins. since we no longer live in the home.

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