Chapter 7 Extends Time in House Before Foreclosure?

The Sacramento area boasts a vast and active real estate market. In addition, house values can be volatile, as can the job market. As a result, many consumers in the Sacramento area can end up behind on their mortgage payments, seemingly without options, and searching for solutions.

This is a common question from consumer debtors:

“I filed a Chapter 7 bankruptcy and my meeting of creditors already happened. I included my mortgage in the bankruptcy. How long until I have to leave? I don’t want to wake up to a Sheriff at my door. It would really help me save money if I can stay in my home as long as I can.”

One common solution is to admit that the debt is an unsustainable burden, file Chapter 7 bankruptcy, and give up the house. In a situation like that, a debtor may choose to surrender their home as part of the Chapter 7 and enjoy the protection of the automatic stay. The automatic stay is a fundamental debtor protection that gives debtors a breathing spell from creditors. It stops all collection efforts, all harassment, and all foreclosure actions. This solution can allow the debtor to bide time to be able to move out of the house and find a new living situation.

In many cases, the mortgage company will file a motion in bankruptcy court called a Motion for Relief from Stay. In that motion, the company will ask the court to lift the automatic stay so that they can pursue state law remedies, such as foreclosure. In other cases, the mortgage company will see that the debtor intends to surrender the home (because the debtor filed a Statement of Intention with the bankruptcy documents) and simply wait for the Chapter 7 to end. Either way, the mortgage company can’t foreclose until the automatic stay dissipates.

Once relief from the stay is granted or the bankruptcy ends, the mortgage company can start the foreclosure process.

Whatever an individual debtor’s situation may be, these options can be very difficult to understand fully. This information and decisions that follow could very well mean the difference between a debtor and her family having a roof over their heads. While the options are there, it takes experience and depth of understanding of the Bankruptcy Code to fully use them. That is yet another reason to seek the advice of a Sacramento bankruptcy attorney.