The automatic stay is one of the most powerful tools in bankruptcy law, and it applies immediately upon filing.
How the Automatic Stay Stops Foreclosure
The moment your bankruptcy petition is filed with the court, the automatic stay goes into effect. This means:
- A scheduled foreclosure sale is halted
- Pending foreclosure lawsuits are paused
- The lender cannot proceed with any collection activity
- Phone calls, letters, and legal action must stop
Chapter 13: The Long-Term Solution
While the automatic stay provides immediate relief, Chapter 13 provides the long-term solution. Your repayment plan proposes to cure the mortgage arrears over 3-5 years. As long as you make plan payments and stay current on ongoing mortgage payments, the lender cannot resume foreclosure.
Chapter 7: Temporary Relief Only
In Chapter 7, the automatic stay stops foreclosure temporarily, but since Chapter 7 does not provide a mechanism to cure arrears, the lender can seek relief from the stay to resume foreclosure. Chapter 7 buys time but does not save the home long-term if you are behind on payments.
Limitations
If you have filed and had a bankruptcy case dismissed within the past year, the automatic stay may be limited to 30 days. If you have had two cases dismissed in the past year, you may get no automatic stay at all. These limitations can be addressed by filing a motion showing good faith.