When homeowners in California fall behind on their mortgage payments, foreclosure can move quickly — sometimes within just 120 days. Understandably, one of the first questions people ask is: “If I file bankruptcy, will it stop foreclosure?”
The short answer is: Yes, but only temporarily. Filing for bankruptcy triggers an automatic stay that pauses foreclosure proceedings, but it doesn’t guarantee you’ll keep your home in the long run. Whether bankruptcy is the right strategy depends on your financial situation, the type of bankruptcy you file, and your goals.
How Bankruptcy Affects Foreclosure in California
The moment you file for bankruptcy, the court issues an automatic stay. This is a legal order that immediately stops creditors — including mortgage lenders — from continuing collection efforts. That means foreclosure proceedings, trustee sales, and even collection calls are put on hold.
However, this pause is temporary. Lenders can petition the court to lift the stay, and unless your bankruptcy plan addresses your mortgage debt, foreclosure may resume once the case ends. The U.S. Courts Bankruptcy Basics guide explains this in detail.
Types of Bankruptcy and Their Impact on Foreclosure
Chapter 7 Bankruptcy
Chapter 7 is often called “liquidation bankruptcy.” It can temporarily stop foreclosure but does not provide a long-term solution for keeping your home.
- How it works: Most unsecured debts (like credit cards and medical bills) are wiped out. However, your mortgage lender still has rights to the property.
- Foreclosure impact: The stay may buy you a few months, but once the case closes, lenders can resume foreclosure unless you catch up on payments.
Example: A family in Pomona filed Chapter 7 bankruptcy three weeks before their foreclosure sale. It delayed the sale for three months, giving them time to move, but they ultimately lost the home.
Chapter 13 Bankruptcy
Chapter 13 is often more helpful for homeowners because it restructures debt into a repayment plan lasting 3–5 years. This plan can include past-due mortgage payments, allowing you to catch up over time.
- How it works: You propose a repayment plan approved by the court. As long as you make payments, the lender cannot foreclose.
- Foreclosure impact: If you stay current on both your repayment plan and future mortgage payments, Chapter 13 may let you keep your home.
Example: A Los Angeles homeowner filed Chapter 13 after falling $30,000 behind. Over five years, they repaid the arrears through the plan and avoided foreclosure altogether.
For more details, the U.S. Department of Justice Bankruptcy Trustee Program explains how Chapter 13 works.
The Limitations of Bankruptcy for Stopping Foreclosure
While bankruptcy can help, it’s not a magic bullet. Here are the key limitations:
It’s a Temporary Solution
Chapter 7 only delays foreclosure; it doesn’t resolve mortgage debt. Chapter 13 can work, but only if you have enough income to stick to the repayment plan.
Lenders Can Request Relief From Stay
If your lender believes the bankruptcy is only delaying the inevitable, they can ask the court to lift the automatic stay. If approved, foreclosure resumes even while bankruptcy is pending.
Credit Damage
Bankruptcy severely impacts your credit, typically staying on your report for 7–10 years. This can make it difficult to qualify for loans, credit cards, or even rental housing.
Tip: See our post on what happens if you let your house go into foreclosure in California for a side-by-side look at how foreclosure affects credit compared to bankruptcy.
Bankruptcy vs Other Foreclosure Alternatives
Bankruptcy isn’t the only way to stop foreclosure. Homeowners should also consider:
- Loan Modification: Restructure your loan for lower payments. See our guide on loan modification vs selling to stop foreclosure.
- Short Sale: Sell the home for less than what’s owed, with lender approval.
- Deed in Lieu: Voluntarily transfer the property back to the lender to avoid foreclosure.
- Sell to a Cash Buyer: The fastest way to resolve foreclosure before the auction date.
Real-Life Case Study — Bankruptcy to Buy Time
A San Diego couple filed Chapter 13 after falling eight months behind on their mortgage. The bankruptcy stopped foreclosure and allowed them to catch up over three years. Unfortunately, when the husband lost his job, they couldn’t keep up with the plan. Instead of losing the house to foreclosure, they sold quickly to a cash buyer, which gave them enough to settle debts and start over.
When Bankruptcy May Make Sense
- You have significant unsecured debt (credit cards, medical bills) in addition to mortgage arrears.
- You have steady income that could support a Chapter 13 repayment plan.
- You need time to negotiate with your lender or prepare for a move.
When Selling May Be Better
- You don’t have enough income to keep up with a repayment plan.
- The home has significant equity and selling would allow you to walk away with cash.
- You want to avoid the long-term credit damage of bankruptcy.
Final Thoughts
So, does filing bankruptcy stop foreclosure in California? Yes, but only temporarily. Bankruptcy triggers an automatic stay that pauses foreclosure, but unless you can commit to a repayment plan under Chapter 13, it usually just buys time.
For many homeowners, selling the home — especially to a cash buyer — is a more permanent solution that protects credit and avoids years of financial strain.
For a full breakdown of options, check out our 2025 Guide to Stopping Foreclosure in California.
At Mrs. Property Solutions, we’ve helped California homeowners in both situations — some used bankruptcy to buy time, others chose a quick sale to avoid the stress. If you’re facing foreclosure, reach out today to see what option fits your situation best.