People in Texas who are facing foreclosure may consider bankruptcy a possibility when no other options are available. The extent bankruptcy can help the foreclosure defendant depends on a number of factors, including the chapter utilized, the amount of arrearages, other debts and monthly income.
In most cases, filing bankruptcy will delay a foreclosure case. Upon filing the bankruptcy petition an automatic stay of execution is granted. Mortgage companies and banks must place a hold on state foreclosure proceedings, including a sheriff's sale. This stay applies in both Chapter 7 and 13 cases. In Chapter 7 cases, a creditor will normally file a motion to lift the stay. This is essentially a court order to permit a foreclosure case to proceed. In any event, the foreclosure case will be delayed a few months.
Though the bankruptcy court often cannot prevent foreclosure in a Chapter 7 case, the debtor and the creditor can agree to continue the mortgage through a reaffirmation agreement. The agreement must be approved by the court.
On the other hand, a Chapter 13 case can provide a great deal more protection to a debtor. Through a repayment plan, the debtor can propose to pay the arrearage over a period of time, often spreading it out over the length of the plan. This payment is in addition to the regular mortgage payment.
If a foreclosure has already occurred, a bankruptcy debtor can usually discharge a deficiency judgment. This is applicable to most situations where the foreclosure sale price did not fully pay the mortgage.
Bankruptcy laws can be complex and no two situations are the same. Those facing foreclosure should avoid the well-meaning advice of friends and relatives. A consultation with an experienced bankruptcy attorney might be the best method for exploring options.