Foreclosure Sales and Timely Filing for Bankruptcy

Occasionally, a mortgage loan borrower is faced with an upcoming foreclosure sale date of his or her home and has already exhausted all options at the state court level to attempt to cancel the foreclosure sale date without success. If the borrower is otherwise eligible to file for bankruptcy, however, a timely filed bankruptcy can result in a cancellation of an upcoming foreclosure sale date.

The general process of foreclosing a mortgage is governed by state law, and, therefore, a lawsuit for foreclosure of a mortgage is handled through the state court. The general bankruptcy process, however, is governed by federal law, and, therefore, a legal proceeding for bankruptcy is handled through the federal court. If someone files for bankruptcy, it triggers what is referred to as an “automatic stay.” The triggering of the automatic stay at the federal court level has the effect of temporarily freezing any other legal proceedings that the person filing for bankruptcy may have pending at the state court level at the time that the bankruptcy case is filed. This includes foreclosure lawsuits.

While the automatic stay is only temporary, timely filing for bankruptcy will trigger the automatic stay which can result in a cancellation of an upcoming foreclosure sale date. It is extremely important to be aware, however, that the automatic stay must be triggered before the date of a scheduled foreclosure sale; otherwise, the automatic stay will have no legal effect to cancel the foreclosure sale. In other words, if a borrower in foreclosure who is otherwise eligible to file for bankruptcy waits until sometime after a scheduled foreclosure sale date to file for bankruptcy, the subsequent bankruptcy filing will not retroactively cancel the foreclosure sale or otherwise provide a legal basis to have the foreclosure sale reversed.

Because the proper preparation of the necessary documents required for filing a bankruptcy case can be a rather complicated and time-consuming process, it is important to consult with an experienced bankruptcy attorney as far in advance of any future foreclosure sale date as possible, so that the bankruptcy attorney has sufficient time to evaluate the borrower’s overall financial situation and file the bankruptcy case without being in an otherwise avoidable rush.

If you are in foreclosure proceedings and a foreclosure sale date has been set for your home, please do not hesitate to contact Loan Lawyers as soon as possible to schedule a free consultation. Our Fort Lauderdale foreclosure attorneys and bankruptcy attorneys in Fort Lauderdale have represented countless mortgage loan borrowers in foreclosure proceedings and bankruptcy proceedings, and we look forward to the opportunity to represent you.