Does filing for bankruptcy stop foreclosure proceedings?

Filing for bankruptcy can help stop foreclosure proceedings in Colorado. When a person files for bankruptcy, an injunction called the “automatic stay” is put into effect. The automatic stay prevents creditors from being able to collect debts from the person who filed for bankruptcy. This includes lenders and creditors who are attempting to foreclose on a property. If the person filing for bankruptcy has defaulted on a loan but the property has not yet been foreclosed, the automatic stay will require the lender to stop the foreclosure process. The automatic stay is in place until the bankruptcy case is resolved. During this time, the debtor and the lender can negotiate a repayment plan, or the debtor can surrender the property if the debt is too large. If the property has already been foreclosed before the bankruptcy was filed, the automatic stay will not help. However, a debtor can file an “adversary proceeding” to try to have the sale declared void. In order to do this the debtor would need to prove that the foreclosure was illegal, or that the amount of debt was incorrect. In Colorado, filing for bankruptcy can be a powerful tool for those facing foreclosure. It puts a stop to the foreclosure process to give time for the debtor and creditor to negotiate a repayment plan, or for the debtor to surrender the property, if necessary.

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Does filing for bankruptcy stop foreclosure proceedings?

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