When homeowners in Tennessee fall behind on their mortgage, they may face foreclosure. This process allows the lender to take back the property and sell it to recover unpaid debt. Many people do not realize that filing for bankruptcy can temporarily stop foreclosure. The automatic stay, a legal protection in bankruptcy, gives homeowners time to explore their options.
How an automatic stay stops foreclosure
The automatic stay goes into effect as soon as someone files for bankruptcy. This court order stops creditors from collecting debts, including foreclosure proceedings. If a lender has already started foreclosure, the process must pause immediately. The bank cannot schedule a foreclosure sale or move forward with an eviction while the stay is active.
This protection can give homeowners breathing room to figure out their next steps. Some may use this time to catch up on missed payments through a repayment plan. Others may look into loan modifications or selling their home to avoid foreclosure. The automatic stay does not erase debt, but it can help delay foreclosure and prevent sudden loss of a home.
When the automatic stay might not apply
The automatic stay is powerful, but it does not protect every homeowner in every situation. If a person has filed for bankruptcy multiple times within a short period, the court may limit or deny the stay. In some cases, lenders can ask the court to lift the stay, allowing foreclosure to continue. This often happens when a homeowner has no way to repay the loan.
The stay also does not last forever. In a Chapter 7 bankruptcy, which focuses on wiping out unsecured debt, the stay usually lasts only a few months. Once the bankruptcy case ends, foreclosure can resume. In a Chapter 13 bankruptcy, homeowners may be able to keep their home by following a repayment plan that lasts three to five years.
Tennessee residents facing foreclosure should act quickly when considering bankruptcy. The automatic stay can offer temporary relief, but it is not a permanent solution. Homeowners need to have a plan for dealing with their mortgage debt before the stay expires. Before filing, homeowners should research their options and decide on the best path forward.
