A sheriff's sale is a scary thing to have looming on the horizon. Whether your mortgage company has foreclosed on your house or other creditors have placed liens on your personal property, a sheriff's sale means you could lose your property forever. Bankruptcy can stop a sheriff's sale, however, if you file your case before the sale takes place.
If you owe money to your creditors and you default on your payments, your creditors have several avenues available to them to collect the amounts you owe, including filing a lawsuit against you to obtain a judgment for the past due balance. The collection methods available to your creditors vary depending on the state in which you live, but every state allows creditors to sue you if you do not pay. Some states also require mortgage companies to pursue foreclosure through the court system.
Once a creditor obtains a judgment against you for the past due balance you owe, in some states the creditor can obtain a judgment lien, which allows the creditor to take your property to satisfy the debt. If the creditor is a mortgage company and the mortgage company obtains a judgment for foreclosure, the mortgage company can sell your house. Because the sheriff of your city or county will conduct such a judicial sale, the sale is called a sheriff's sale.
Bankruptcy is a form of debt relief you obtain by filing a case in federal bankruptcy court. Consumers can file bankruptcy under Chapter 7, Chapter 11 or Chapter 13. The type of relief bankruptcy affords you depends on which chapter you file, but every bankruptcy provides protection from collection activity. This protection is the automatic stay.
Section 362 of the Bankruptcy Code provides that once you file a bankruptcy case, your creditors are automatically stayed from taking any action to collect the debts you owe them. This means that when you file your bankruptcy case, the filing automatically prohibits your creditors from calling you, sending you letters, garnishing your wages or repossessing your property.
Stopping a Sheriff's Sale
You can stop a sheriff's sale by filing bankruptcy if you file your case before the sale actually happens. When you receive notification of the date and time of the sheriff's sale, you must file bankruptcy before that date and time in order to stop the sale. In the case of a sheriff's sale of a home, if you do not intend to repay the mortgage, the stay is only temporary. If you cannot afford your mortgage, the bankruptcy will only stop the sale for a short while, and the mortgage company will reschedule it.
This article is for informational purposes only and should not be construed as legal advice. Consult with a bankruptcy attorney if you are considering bankruptcy. Collection laws vary from state to state.
Rebecca K. McDowell is an attorney focused on debts and finance. She has a B.A. in English and a J.D. She has written finance and tax articles for Zacks and eHow.