Question: If a foreclosure action has already been filed in state court, can you still file a bankruptcy in order to save your home?

Yes. The filing of a Chapter 13 bankruptcy can stop the foreclosure action even if a judgment has already been entered against you and the sale of your home has been scheduled so long as the Master Commissioner has NOT actually sold your home. As soon as the bankruptcy case is filed, your bankruptcy attorney will contact the attorney for the mortgage company as well as the Master Commissioner in order to notify them of the filing and at that point no further action can be taken by the mortgage company to sell your home.

Your Chapter 13 plan filed with the bankruptcy court will propose to pay the mortgage company a certain amount of money each month to catch up on your past due payments. These payments are sent to your court appointed trustee who forwards them on to your mortgage company.

Of course, you must also be able to begin making your normal monthly mortgage payment in addition to a payment to the bankruptcy trustee. The advantage of filing a Chapter 13 is that you are given five years to catch up your past due payments at zero percent interest. On the other hand, mortgage companies usually require the past due amount paid in a lump sum payment in order to stop the foreclosure unless you are able to complete a loan modification.

If you do not have the ability to save your home from foreclosure, you may need to consider a Chapter 7 bankruptcy to protect you from garnishment if the mortgage company ends up with a deficiency judgment against you. This would occur if your house sells for less than what you owed on it.

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