When a Bankruptcy is filed, an “automatic stay” goes into effect. An automatic stay stops most creditors from continuing with collection activities, which includes foreclosures, wage garnishments, lawsuits, etc. (11 U.S.C. § 362) The automatic stay will remain until end of bankruptcy, discharge of debt, or creditor exceptions. However, the automatic stay may be “lifted” if a creditor has sufficient cause. (11 U.S.C. § 362(d)-(e)) Pursuant to the Bankruptcy Code, an automatic stay may be lifted on real estate if (1) there is a lack of adequate protection (i.e., insurance), (2) lack of equity, or (3) the real estate is not essential to the reorganization. (11 U.S.C. § 362)
Thus, an automatic stay is very powerful and may stop a foreclosure. However, an automatic stay may not last very long if a secured creditor seeks relief from the automatic stay with good cause.
Note: Each State has its own rules concerning the automatic stay, so please consult with an attorney in your State of residence.
If you have any questions, please do not hesitate to contact an attorney.