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Does Bankruptcy Stop Foreclosure?
Understanding Bankruptcy and Foreclosure in California
Bankruptcy and foreclosure are two legal procedures that affect many individuals in California. It is essential to understand how these processes interact, especially for homeowners facing financial difficulties. Let’s delve into whether bankruptcy can stop foreclosure in California.
What is Foreclosure?
Foreclosure is a legal procedure that lenders use to reclaim properties from borrowers who fail to meet their mortgage obligations. In California, lenders may choose a judicial or non-judicial foreclosure, depending on the situation and the specific terms of the mortgage contract.
Bankruptcy as a Legal Shield
Filing for bankruptcy can provide a temporary halt to foreclosure proceedings, thanks to a mechanism known as the automatic stay. This immediate injunction prevents creditors from collecting debts and proceeding with foreclosure during the bankruptcy process. However, the effectiveness of this legal shield depends on the type of bankruptcy filed — Chapter 7 or Chapter 13.
Chapter 7 Bankruptcy and Foreclosure
Filing a Chapter 7 bankruptcy can temporarily pause foreclosure. However, it doesn’t provide a long-term solution to save your home. The automatic stay stalls foreclosure proceedings, but once the bankruptcy is discharged, the lender can resume the foreclosure process. A foreclosure lawyer can provide an estimate of how long the process will take.
Chapter 13 Bankruptcy and Foreclosure
On the other hand, Chapter 13 bankruptcy can be a pathway to save your home from foreclosure. Unlike Chapter 7, Chapter 13 allows the debtor to develop a repayment plan, which can include mortgage arrears. As long as the debtor keeps up with the plan’s payments, the lender cannot foreclose the property.
Seeking Legal Advice
Bankruptcy and foreclosure are complex legal processes. It’s crucial to seek legal advice if you’re considering bankruptcy as a means to stop foreclosure. At Liviakis Law Firm, we are dedicated to helping our clients navigate these difficult situations. Contact us at 916 459 2364 to discuss your options.