Quite often people who are facing foreclosure are often considering filing for bankruptcy.
Many times, individuals get into overwhelming debt. Sometimes it’s due to an accident, or an unexpected medical condition where the medical bills spiral out of control. In other cases, a divorce can cause serious financial problems. In still other cases, it’s overspending. But whatever the cause, overwhelming debt frequently leads to foreclosure and bankruptcy.
With certain exceptions, filing bankruptcy will relieve an individual of all his dischargeable debt. This means that after bankruptcy, all of an individual’s (dischargeable) debt is wiped out. The purpose of bankruptcy is to “wipe the slate clean” and give an individual (or corporation) a “new start.”
The Automatic Stay
One of the ways in which bankruptcy gives debtors immediate relief is through the “automatic stay.” When a bankruptcy is filed, the “automatic stay” goes into effect. This means that all efforts by anyone to collect on a debt owed by the bankrupt must stop. Immediately. Automatically. No court order is required, and it does not matter whether you had actual notice of the bankruptcy filing or not. Any type of collection effort must stop.
When a bankrupt’s home is being foreclosed on, the automatic stay immediately stops all foreclosure proceedings. In fact, any foreclosure conducted after the automatic stay goes into effect is void. Worse, anyone violating the automatic stay could be held in contempt of court.
Because the purpose of the automatic stay is to prevent creditors from collecting on any debts owed in order to give the bankruptcy court time to determine what the bankrupt’s debts and assets are.
The good news is that the automatic stay does not last forever. All it does is postpone collection proceedings for a short amount of time. Once the stay is lifted, either by motion to the court or by the passage of time, foreclosure proceedings can be reinstated.
Debtors often use bankruptcy purposefully to stop the foreclosure proceedings. While this may be tactic used to harass a lender or attempt to get some kind of leverage, it is an abuse of the bankruptcy system. Furthermore, filing a bankruptcy for the sole purpose of stopping the foreclosure is not a way to “save” your house.
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If you have real estate problems, we can help. We are real estate attorneys with over 30 years’ experience. We serve clients in Atlanta, and in a number of counties throughout Georgia, including: Clayton County, Cobb County, Dekalb County, Douglas County, Fulton County, and Paulding County, among others. To schedule your free phone consultation, call us at: 770-888-7707. Or you can contact us here.