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How Chapter 7 bankruptcy can save you from foreclosure

As an Ohio resident, filing Chapter 7 bankruptcy may offer you an opportunity to get a financial fresh start if you are in the unfortunate position of not being able to pay your bills. It can even forestall foreclosure of your home. Be aware, however, that a Chapter 7 bankruptcy does not cancel your mortgage. What it does is temporarily stop the foreclosure and give you the chance to catch up on your missed payments.

Bankruptcy is a legal right granted by federal law, and all bankruptcy proceedings are handled in federal court. As soon as you file for Chapter 7 and your creditors become aware of it, they must stop all debt collection activities, including harassment of you by telephone or mail. This is because of the automatic stay that the court issues immediately after you file your bankruptcy petition. The stay typically lasts for the length of your bankruptcy proceeding unless a creditor files a request to have the stay lifted and the judge grants such request.

In terms of your home, all foreclosure proceedings are stopped, even if a foreclosure sale date already has been scheduled. Should your mortgage lender file a motion with the court to have the stay lifted, the court will schedule a date to hear the motion; that is, hear the evidence presented by the lender as to why the stay should be lifted. Usually the hearing date is at least 30 days from the date on which the motion was filed.

If the court does not grant the motion, the stay remains in effect. If it grants the motion, the judge will issue an order lifting the stay. This usually takes several additional days. Once the lender has the order, a new foreclosure sale date can be scheduled.

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