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Just the idea of a foreclosure is enough to keep many homebuyers up at night. The prospect of losing a home, especially one that has been occupied by your family for some time, can fill you with dread. The solution that many people have used or have attempted to use is to file for bankruptcy. The common perception in many circles is that bankruptcy can be used to cancel the foreclosure proceedings and prevent the loss of the property. In the past, many have gone as far as to file multiple bankruptcies in a short space of time in order to fend off foreclosure. This avenue of preventing a foreclosure is no longer open. The Bankruptcy Appellate Panel for the Ninth District has again confirmed the legal block against using serial bankruptcies to prevent a foreclosure.
Bankruptcy and Foreclosure Filing bankruptcy can initially halt the progress of a foreclosure proceeding. Filing a Chapter 13 bankruptcy allows you submit a plan to repay your creditors over a period of three to five years. Chapter 13 bankruptcy instantly stops your creditors from being able to foreclose on property or garnish wages. This can buy time to find a way to hold onto the property or sell it in order to repay creditors with the proceeds. However, filing more than one bankruptcy in a short period of time is no longer an option. According to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 enacted by congress, if a debtor has had a bankruptcy in the previous year, the automatic stay provided by the Chapter 13 bankruptcy will last only 30 days. The debtor will have to apply for a new stay in order to remain in the home past those 30 days.
No More Protection for Serial Filers In the past, the bankruptcy court has been lenient towards debtors, continually extending stays; this is no longer the case. A ruling in late 2012 further emphasized the court’s new attitude towards debtors. A debtor who had filed bankruptcy dismissed the bankruptcy after the lender applied for and got relief from the automatic stay. On the day of the trustee’s sale, the debtor made a second bankruptcy filing. The home was sold and the lender moved to dismiss the bankruptcy on the grounds that the stay was not in place at the time of the sale. The court agreed with the lender and allowed the sale while also dismissing the bankruptcy.
Under 11 U.S.C. 109(g) debtors can no longer be protected by bankruptcy except in a very narrow set of circumstances. The exceptions include:
It is now the debtor’s responsibility to prove a change of circumstances so that they can keep their home from being foreclosed upon. Without proof of a change in circumstances, a lender has no obligation to seek relief from a stay and may proceed with the foreclosure.
About the Author
John Thomas Dzialo is a leading foreclosure attorney in California, with nearly 40 years of experience in litigating real estate and mortgage lending cases. The Law Offices of John Dzialo prides themselves on building strong relationships with their clients to ensure that they are well-informed, fully represented and find a solution to their legal problem that is in their best interests.Google+