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Can Filing Bankruptcy Stop Foreclosure on Your Home?

Filing Chapter 7 to Stop Foreclosure

You are facing foreclosure.  It’s scary and you need information.  Bankruptcy protection falls under Chapters 7 and 13 in the U.S. Code. If you qualify for Chapter 7, you can discharge some or all of your debt load. It also provides for an automatic stay of all legal proceedings, including foreclosures, that goes into effect immediately.

However, the lender can then file a Motion to Lift the stay on your foreclosure, and probably will. Because a Motion to Lift is often hard to fight, Chapter 7 bankruptcy will probably only delay foreclosure. The only way to avoid a Motion to Lift is to catch up on your payments, which may be possible if you don’t have to worry about your other debts.

The stay lifts automatically when the court grants your discharge of debts, which takes about three months. However, it usually takes a lender a while to restart the foreclosure process, so your stay may actually last somewhat longer.

Filing Chapter 13 to Stop Foreclosure

Filing for Chapter 13 bankruptcy is another option available for homeowners. Unlike Chapter 7, it doesn’t discharge all debts. You will have to prepare a repayment plan for your creditors and have it approved by your bankruptcy trustee. As with Chapter 7, you’ll get an automatic stay when you file, and it will last as long as the bankruptcy proceedings are in effect. However, you do have to prove you have enough income to not just keep up with your current monthly payments, but also to pay back your arrears over the course of 60 months maximum. If you can meet these conditions, you may be able to avoid foreclosure.

What Is a Lien Strip?

Under Chapter 13, in Minnesota you may have one more option for avoiding foreclosure. A lien strip is just what it sounds like: it strips away any mortgages and other liens beyond your primary mortgage. If a second or subsequent mortgage was driving the foreclosure, this can allow you to save your home.

This may not work unless your home has declined in value. If it has, and all your equity is in the first mortgage, then any other mortgages would count as unsecured debt and would be discharged.

Call for Help

If you have questions about bankruptcy or foreclosure call Minneapolis Bankruptcy Lawyer, Brea Buettner-Stanchfield at the Buettner Law Group, LLC at 612-377-5311 or e-mail now for a free consultation.



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