When you file either a Chapter 13 or Chapter 7 bankruptcy in San Diego, the court automatically issues an Order for Relief that includes an “automatic stay.” The automatic stay directs all creditors to cease their collection activities immediately. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending–typically for three to four months. However, there are two exceptions to this general rule:
- Motion to lift the stay: The lender has the right to obtain the bankruptcy court’s permission to proceed with the sale by filing a “motion to lift the stay. If this occurs you may not get the full three to four months although the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay.
- Foreclosure notice already filed: Unfortunately a bankruptcy’s automatic stay won’t stop the clock on the advance notice that most states require before a foreclosure sale can be held or a motion to lift the stay can be filed. Prior to selling a home in San Diego, a lender has to give the owner at least three months’ notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period would elapse after you’d been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale.
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