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Can Bankruptcy Stop a Foreclosure Sale From Happening in Alabama

Kerry by Kerry
January 30, 2023Filed under:
  • Finance

In Alabama, filing for bankruptcy can stop a foreclosure sale from happening, but it depends on the type of bankruptcy and the stage of the foreclosure process.

When you file for bankruptcy, an automatic stay goes into effect. The automatic stay is a legal order that prohibits most creditors, including mortgage lenders, from taking any collection action against you, including foreclosing on your property. However, the automatic stay is only temporary and the lender can ask the court to lift the stay.

If you file for Chapter 7 bankruptcy, the automatic stay will temporarily halt the foreclosure process, but it will not permanently stop it. In Chapter 7, the automatic stay lasts only for a few months. After that, the lender can ask the court to lift the stay and proceed with the foreclosure sale. However, if you file for Chapter 13 bankruptcy, the automatic stay will last for the duration of the case, which is typically 3 to 5 years. During this time, you can propose a repayment plan to catch up on missed mortgage payments and keep your home.

It’s important to note that filing for bankruptcy does not automatically eliminate your mortgage debt or make it go away, it only temporarily stops the foreclosure process. In order to keep your home, you must continue to make your mortgage payments on time, even if you are in bankruptcy.

Additionally, if your home is already in the process of foreclosure, and a sale date has been set, filing for bankruptcy will not stop the sale from happening. However, if the sale date is set after the bankruptcy case is filed, the automatic stay will temporarily stop the sale from happening.

It’s important to keep in mind that the automatic stay is only temporary and the lender can ask the court to lift the stay and proceed with the foreclosure sale. If you want to keep your home, it’s important to work with your attorney to propose a repayment plan in Chapter 13 bankruptcy or consider alternatives such as loan modification, forbearance, or a short sale.

In Alabama, you have the right to redeem your property within a certain period of time after the foreclosure sale. In Alabama, the right of redemption can last up to a year after the foreclosure sale. During this time, the homeowner may redeem the property by paying the full amount of the debt, interest, and costs due under the mortgage. Because the distressed former homeowner has to come up with so much cash to get the house back, redemption is rare.

In conclusion, filing for bankruptcy can stop a foreclosure sale from happening in Alabama, but it depends on the type of bankruptcy and the stage of the foreclosure process. If you file for Chapter 7 bankruptcy, the automatic stay will temporarily halt the foreclosure process, but it will not permanently stop it. On the other hand, if you file for Chapter 13 bankruptcy, the automatic stay will last for the duration of the case and you can propose a repayment plan to catch up on missed mortgage payments and keep your home. However, if your home is already in the process of foreclosure, and a sale date has been set, filing for bankruptcy will usually not stop the sale from happening. It’s important to work with an experienced Prattville bankruptcy attorney to understand your options and rights in the state of Alabama.

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