Article written by Columbia, SC bankruptcy attorney Daniel Stone
Yes, a Chapter 7 bankruptcy filing does stop a foreclosure sale. However, unless you bring your mortgage payments current shortly after filing a Chapter 7, your mortgage lender will either file for relief of the automatic stay so they can resume foreclosure or wait until the bankruptcy discharge and resume foreclosure at that point. The practical point for debtors if they are behind on their mortgage payments is that they should file Chapter 13 bankruptcy if they want to keep their house. Chapter 13 bankruptcy allows debtors to draft a plan to pay back the arrearages owed to the mortgage lender over a 3-5 year period. As long as the debtor complies with the terms of the Chapter 13 plan and resumes making their regular mortgage payment, the mortgage lender cannot pursue collections or foreclosure.
If a debtor is current on their mortgage payments and has different reasons for filing a bankruptcy, Chapter 7 may be an option. That is, if they meet certain criteria such income and equity issues. In South Carolina, a debtor can have as much as $56,000 in equity ($112,000 for joint owners on deed) and still protect their home from creditors or a trustee in a Chapter 7 Trustee.