How can bankruptcy delay a foreclosure?

Many Arizona homeowners have been able to delay their foreclosure proceedings -- and prevent the loss of their homes -- by filing for bankruptcy. This benefit may be received by filing for bankruptcy after it is clear that a foreclosure will occur. The bankruptcy then triggers what's referred to as an "automatic stay," which prevents all debt collection activities against you -- including legal actions like foreclosure.

The automatic stay benefit is received whether the homeowner files for Chapter 7 or Chapter 13 bankruptcy. Once the court issues the "Order of Relief" which grants the automatic stay, creditors must stop all of their collection efforts. They cannot call you and harass you to pay your debts on the phone, they cannot continue to garnish your wages through court-ordered wage garnishment and they can't continue to proceed with efforts to foreclose on your residence. Even if a foreclosure sale is scheduled relating to your property, this sale must be postponed until your bankruptcy has been finalized.

It should be noted that this strategy of foreclosure prevention will not work in all cases. Sometimes, a bank can successfully pursue a motion to lift the automatic stay and continue moving forward with their foreclosure efforts.

If you're facing foreclosure, make sure that you understand all of your foreclosure defense options. This way, you can choose the most appropriate defense strategy to suit your needs. An experienced Arizona bankruptcy attorney will be well-versed in different ways to fight a foreclosure and how to proceed with these strategies in a cost-effective and suitable fashion.

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  • State Bar of Arizona
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