Will Filing for Bankruptcy Stop Foreclosure in Ohio?

Bankruptcy Temporarily Stops Foreclosure

Yes, filing for bankruptcy will stop foreclosure in Ohio, or any other state for that matter, at least on a temporary basis. The minute a bankruptcy case is filed, an injunction known as the automatic stay springs in to place. The automatic stay is and order of the bankruptcy court which prevents creditors from continuing with collection efforts while the court oversees the bankruptcy case. Lawsuits, garnishments, collection calls, and yes even foreclosure, are absolutely prohibited while the automatic stay is in effect. You can file a bankruptcy the day before a scheduled foreclosure sale and your bank will have no choice but to call it off.

The Automatic Stay Does Not Last Forever

Debtors should be aware that the automatic stay will not last forever. For example, if you file bankruptcy to stop the foreclosure sale of your home, but have no ability to catch up on past due payments, the mortgage company will ask the court for relief from the automatic stay and, in most cases, will be able to proceed with foreclosure. Similarly, you may benefit from the protection of the automatic stay for 3 to 4 months while your Chapter 7 bankruptcy case is pending, however, once the case closes and the discharge is issued, you will need to once again continue making payments as agreed in your mortgage documents. The bottom line is that filing for bankruptcy does not give you a free house. The automatic stay will disrupt the foreclosure process, and stop it for time, but your lender will be able to foreclose if you can’t maintain normal mortgage payments.

The Chapter 13 Option

If you are capable of maintaining your normal mortgage payments, but simply don’t have the funds to pay back past-due payments in a lump sum, chapter 13 bankruptcy may be a good option. Chapter 13 bankruptcy allows debtors to pay back mortgage arrearages in manageable monthly payments over a 3 to 5 year period. Rather than being forced to come up with past due amounts in one or two big checks, the past-due amounts are broken up over the life of the Chapter 13’s payment plan, which is much more manageable for most families and allows for many of them to keep their home rather than losing it to foreclosure. A long as mortgage payments are maintained, the automatic stay will remain in effect for the entire lifecycle of the chapter 13 case, usually 3 to 5 years.