Chapter 7 and Chapter 11
Although Chapter 13 is correctly known as the most common type of bankruptcy to stop a foreclosure, it is not the only type of bankruptcy proceeding that will create an automatic stay. Chapter 7 liquidation bankruptcy filings will also stop a foreclosure as will a Chapter 11 reorganization, and in some cases these other types of bankruptcy filings may be appropriate.
Chapter 7 to Stop a Foreclosure
If you have fallen behind on your mortgage payments and you want to surrender your home as well as wipe out your other debts, Chapter 7 may be a viable option. As is the case with Chapter 13, when you file a Chapter 7, the automatic stay goes into force and any pending foreclosure must stop.
Assuming that your Chapter 7 Statement of Intentions provides for a surrender of your home, the mortgage lender will need to file a Motion for Relief from Stay, wait for a hearing on the motion (3 to 6 weeks), then restart the foreclosure process (4 weeks). Thus, Chapter 7 would not only eliminate any personal liability that you might have from an unpaid mortgage, but a filing would give you time to get your affairs together and find a new place to live.
Chapter 11 to Stop a Foreclosure
Although Chapter 11 is best known as a business reorganization bankruptcy, it can be used by individuals to reorganize. In fact, Chapter 11 is the only option to reorganize if your debts exceed the debt ceilings currently in force under Chapter 13 (no more than $336,900 0f unsecured debt and/or $1,010,650 of secured debt). Chapter 11 operates similarly to Chapter 13 in that the debtor prepares and files a plan of reorganization that has to be confirmed (formally approved) by the Bankruptcy Judge.
Chapter 11 is somewhat less practical for most people because of its cost – the filing fee alone is currently $1,039. Attorneys fees for Chapter 11 are also much higher than Chapter 7 or Chapter 13 consumer bankruptcy fees.