Bankruptcy to Cancel Foreclosure Sale

Many homeowners whose real property is in foreclosure decide to file for bankruptcy for the purpose of cancelling the foreclosure sale and avoid their home to be sold at public auction. The filing of bankruptcy petition in federal court will have the legal effect of cancelling the foreclosure sale in the pending foreclosure case. However, that is not the only legal consequence as there is more involved. Bankruptcy is designed for the purpose of allowing a Debtor to eliminate debts and obtain a fresh start whether it is via a chapter 7 liquidation bankruptcy or via a debt reorganization plan in a chapter 13 case. At the filing of a bankruptcy petition a debtor must disclose all assets, real property, personal property whether tangible or intangible. The assets could be administered or sold/liquidated by the case trustee if they are not exempted (protected). Many consumers/debtors think incorrectly that they can “leave out” or not include certain debts and property from the bankruptcy case. Nothing can be “left out”. If the debtor fails to disclose assets he/she can get in serious legal trouble as the bankruptcy petition is submitted under oath and under penalty of perjury. Many consumers/debtors decide to file bankruptcy for the sole purpose of cancelling a foreclosure sale. Such action if not planned correctly could create more problems instead of resolving them. Not only could the bankruptcy discharge be denied but there could be the unintended loss of property. In most cases that are properly planned and filed, there are no surprises for debtors. It is recommended that the bankruptcy be filed with an experienced bankruptcy attorney to properly study the case and establish a plan to resolve the client’s problems, not create problems.

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