by Sue A. Sponte

Created on: March 13, 2011   Last Updated: March 16, 2011

A debtor who is facing an imminent foreclosure, or a foreclosure that recently happened, has a few limited means available to prevent it from happening. Leaving aside efforts to renegotiate the loan or taxes due, and leaving aside the possibility that the debtor will find way to pay the back loan payments and taxes, the debtor’s remedies include bankruptcy or suing for an injunction, or in limited circumstances suing for return of the property under a theory of conversion.

The most reliable way to temporarily prevent a foreclosure is to file bankruptcy. One of the features of bankruptcy law is that it automatically stays pending actions to recover debt or property from the debtor. And because bankruptcy law is federal law, the supremacy clause of the Constitution requires that bankruptcy stays will preempt state court efforts to foreclose on the home. As long as the debtor remains in the bankruptcy process (that is, until the bankruptcy plan is approved or the debtor’s bankruptcy case is dismissed) then the lender may not complete the foreclosure.

The bankruptcy law does allow a lender to ask the bankruptcy court to lift the stay for that particular debt. There are a handful of grounds on which to do so. First, the lender can claim that the stay is not able to adequately protect the lender from loss. For example, if the homeowner has abandoned the house and it is falling into disrepair, then any delay in completing the foreclosure is only hurting the lender (and also not really helping the debtor.) In that case, a judge could order the foreclosure to proceed to make sure that the property is auctioned for the highest possible amount, which is in everybody’s best interests. The lender can also argue that the debtor is so far upside-down in the property that the stay is not serving any purpose because there is no chance that there will be any equity to take from the property to help resolve the bankruptcy.

A second method of preventing foreclosure through legal means is to request an injunction in state court to prevent the foreclosure. There are limited grounds on which to do so, but in some circumstances it might be possible. The first course to investigate is whether the lender has followed all necessary procedures under the law where the property is located to actually foreclose. Although many lenders follow checklists carefully, it is also not uncommon for some banks to rush to foreclosure without filing necessary paperwork and going though

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