Facing foreclosure is nothing short of daunting. If you’re at risk of losing your home, you need to act and may have considered saving your home from foreclosure through bankruptcy. While there are many factors in determining whether bankruptcy is best for you, it’s critical to learn more and understand your options.
Filing for bankruptcy can provide protections, such as the automatic stay, needed to prevent foreclosure. By further understanding bankruptcy and foreclosure you can make the best decisions and work to preserve your home.
What Is an Automatic Stay in Bankruptcy?
Many debtors choose to file for bankruptcy because they’re overwhelmed by debt and need the protections that bankruptcy provides. Among those protections is the automatic stay in bankruptcy. The automatic stay is a provision that ceases collection efforts and repossessions of the filer’s assets. Protected assets include a filer’s home, meaning the automatic stay brings an automatic stop to foreclosures and pending foreclosures.
- The automatic stay is a legal injunction, which means it does not need court approval to take effect.
- The provision is designed to temporarily halt creditors’ actions against debtors and offer debtors a chance to reevaluate and reorganize their finances.
Once you file for bankruptcy, your creditors will be automatically notified of your filing and must legally cease collections, debt-related lawsuits, foreclosures, repossessions, and wage garnishments.
How Does the Automatic Stay Work?
The automatic stay takes effect immediately after filing for bankruptcy. It’s important to understand the scope of its protections, its time frame, and also its limitations. Further, when it comes to saving your home from foreclosure, understanding how the automatic stay works is critical.
- Scope of protection — The automatic stay offers significant protections. In addition to stopping foreclosures, repossessions, and other actions already discussed, the stay can even halt evictions and utility disconnections. If your home is in jeopardy and you’re facing debt, any further letters, emails, phone calls, and other forms of communication from collectors and creditors are banned.
- Duration of the stay — The automatic stay and its protections stay in effect for the duration of your bankruptcy filing. This means that it lasts until your bankruptcy case is discharged or dismissed. The stay would also be lifted if your home or the property in question is no longer part of the bankruptcy estate.
- Overturning the stay — While the automatic stay offers robust protections, it has limitations — mainly that it can be overturned. Creditors can file a motion to lift the automatic stay if they believe the property or asset in question is not essential to debt reorganization. Further, if a creditor believes a property is not adequately protected or insured or that its value is declining, they could file to lift the stay.
The automatic stay ultimately gives debtors time needed to reorganize debt and create a viable bankruptcy repayment plan. Because the automatic stay takes effect as soon as the bankruptcy petition is filed, debtors can begin financial planning right away with an Ohio automatic stay attorney.
Bankruptcy Alternatives When Facing Foreclosure
When your house is threatened by foreclosure, you need to act fast. However, it’s important to make an informed decision about the next steps.
Even if you’re planning on filing for bankruptcy and receiving the automatic stay protections needed to save your home, you may have other options. You might consider:
Getting current on your loan – Even if you can’t catch up on all payments, if you can get as current as possible, your lender may be willing to negotiate instead of pursuing foreclosure.
Asking for a loan modification – Your lender may be willing to negotiate, and a loan modification could reduce your payments so you can get current on your loan.
Seeking forbearance – You may be able to obtain forbearance, whereby the lender agrees to temporarily reduce or suspend mortgage payments. Such agreements are typically temporary in response to financial hardships, however.
We recommend speaking with a knowledgeable Ohio foreclosure attorney before making such an important decision. While everyone’s financial situation is different, alternatives to bankruptcy can be viable for some.
Consequences for Violating the Automatic Stay
Because the automatic stay goes into effect right away, creditors must immediately cease certain actions. Creditors and collectors can no longer contact you or harass you about your debt, and any repossessions of assets must stop.
So what should you do if creditors continue to contact you?
- Make sure that the debt in question was listed on your bankruptcy petition. If it wasn’t, the specific creditor may not be aware of your filing, which is why it’s important to list all debts when filing.
- Tell the creditor to stop. By providing your bankruptcy case number and the date and court where you filed your case, the creditor will have solid proof.
- If the violations continue, contact the bankruptcy court or an Ohio bankruptcy attorney. Any creditor or collections agent who willfully violates the automatic stay is subject to legal action. You can claim damages and attorney’s fees for repeat violators, but we recommend speaking with a bankruptcy lawyer in Ohio first.
In some cases, creditor contact is inadvertent. While all listed creditors are notified of your bankruptcy filing, it can still take some time to receive mailed notifications. Most creditors are aware of the consequences of violating the automatic stay and the court’s order and therefore refrain.
Facing Foreclosure? You’re Not Alone.
Debtors who are facing foreclosure can take advantage of the automatic stay and the protections it provides after declaring bankruptcy. Yet declaring bankruptcy should not be a decision taken lightly. Even though the automatic stay provides robust protections from foreclosure, make sure you’re making the right move.
Consult our legal team first. Our team of experienced Ohio bankruptcy attorneys can help you decide if bankruptcy is best. We’ll explore your options and discuss everything in an understandable and helpful way. Give our lawyers a call today and ask for your free consultation: 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati).
