AUTOMATIC STAY MAY STOP FORECLOSURE, EVICTION DURING BANKRUPTCY

When filing for Chapter 7 or Chapter 13 bankruptcy in South Carolina, an automatic stay can help prevent foreclosure and eviction proceedings.

Filing for Chapter 7 or Chapter 13 bankruptcy protection means that an automatic stay immediately goes into effect, temporarily preventing creditors or collection agencies from proceeding with lawsuits and other efforts to recoup the debts owed. This stay can help individuals avoid the disconnection of electricity, gas, telephone and water service due to lack of payment, as well as legal action related to some delinquent debt. Perhaps most importantly, the automatic stay can have an impact on foreclosure and eviction actions.

Preventing home foreclosure

There are numerous issues an automatic stay can help individuals avoid, including a foreclosure on a home. This bankruptcy tool can stop the foreclosure process temporarily. In Chapter 7, the bankruptcy estate includes all assets and property, and a trustee oversees the process of liquidating assets to pay back debts owed to creditors. The automatic stay allows the trustee more time to sell properties facing the threat of foreclosure, and if a sale does take place, the trustee can use the funds to pay off other debts. This may also allow the individual filing for bankruptcy a better opportunity to find another source of housing.

With Chapter 13, an automatic stay offers more time to restructure debt and possibly avoid foreclosure all together. In this form of bankruptcy, the debtor repays creditors over a period of three to five years, and home mortgages are one type of debt an individual might be able to address through a repayment plan.

The debt restructuring process in a Chapter 13 bankruptcy requires that the filer have adequate income to continue to make monthly mortgage payments, in addition to any liabilities already incurred prior to filing for bankruptcy protection.

Stopping eviction proceedings

For renters, the automatic stay can also provide relief from eviction actions, as long as the landlord did not file a judgment of possession against the tenant prior to the bankruptcy filing. If the tenant filed for bankruptcy first, the stay prohibits the landlord from starting the eviction process or delivering a termination notice to the tenant. Landlords do reserve the right, however, to file a motion with the court to continue with the eviction action - something bankruptcy judges may approve if tenants do not have a valid reason for why the eviction should be delayed.

There are also exceptions to the automatic stay rule if the landlord can present evidence that illegal substance use has taken place or that the tenant has caused significant damage to the property. To move forward, the landlord must file a certification with the court and the tenant has 15 days to respond.

If a tenant received an eviction notice before filing for bankruptcy, the automatic stay does not offer much protection. It's likely that the landlord will be able to proceed with the action uninhibited.

Although it can be difficult to stop foreclosure and eviction proceedings once they are in motion, it's important to know that the automatic stay in Chapter 7 and Chapter 13 bankruptcies do offer some protections for individuals. If you have further questions and would like to learn more about your rights when filing for bankruptcy protection in South Carolina, consult a skilled attorney.

Keywords: bankruptcy, Chapter 7, Chapter 13, foreclosure