Bankruptcy and Foreclosure: What You Need to Know

English: Foreclosure signs, Mortgage crisis,

English: Foreclosure signs, Mortgage crisis, (Photo credit: Wikipedia)

When people fall behind on their mortgage payments and are threatened with foreclosure, they may not be aware of the power of bankruptcy to stop the foreclosure process and allow them to keep their home.  While using bankruptcy to prevent losing a home is not a possibility for everyone, there are some situations in which homeowners can help keep their home by filing for bankruptcy protection. Here’s what you need to know about bankruptcies and foreclosures in North Carolina.

The Bankruptcy Stay

As soon as you file for bankruptcy, the bankruptcy court will order your creditors to stop their collections actions. They can no longer come after you for your unpaid debts, but will instead have to go through the bankruptcy court to try to get their money. This automatic stay applies to foreclosure proceedings as well.  In North Carolina, you can stop a foreclosure by filing bankruptcy up to 10 days after the foreclosure sale.

Repayments in Bankruptcy

The two main types of bankruptcy available for individuals facing foreclosure are Chapter 7 and Chapter 13.  These types of bankruptcy deal with foreclosures differently.

Chapter 13 bankruptcies are often a good option for people who can afford to keep making their ongoing mortgage payments but need more time to make up behind payments. In a chapter 13 bankruptcy you can repay late mortgage payments over a longer repayment time period, as long as five years. Further, if you have a second mortgage on the same property, you might be able to eliminate those payments altogether.

Avoiding Deficiencies

If you cannot afford to continue paying your mortgage and make up your late payments, a Chapter 7 bankruptcy may allow you to surrender the house to the lender and avoid liability for any deficiency on the mortgage.  A “deficiency” refers to the difference between the price a house sells for in foreclosure and the outstanding balance on the mortgage.  If your house sells for less than you owe on the mortgage, you may be liable for the difference.  However, a Chapter 7 bankruptcy would “discharge,” or wipe out, your liability for the deficiency.


Like any legal situation, determining if filing for bankruptcy can help you avoid foreclosure or stay in your home if you’re already in the foreclosure process is not something most people can do without assistance. You need to speak to an attorney experienced with the bankruptcy and foreclosure processes to get an idea of what your options are in this situation.

About the Law Office of James C. White

We represent individuals and businesses in Durham, Wake, Orange and surrounding counties in North Carolina Chapter 7, Chapter 11 and Chapter 13 Bankruptcies.  We provide individualized service and attention to each of our clients, looking  at their financial situation to see whether bankruptcy could help save their home or offer a fresh start.   You can contact us to schedule a free consultation to talk through bankruptcy issues by calling us at 919-313-4636.

Jim White
[email protected]

Jim White helps people and companies facing serious financial injury by bringing and defending lawsuits and representing debtors in bankruptcy. He has successfully taken on banks, large financial institutions and other corporations in “David v. Goliath” cases. You can reach him at 919-246-4676.