What Happens If I File Bankruptcy to Stop Foreclosure in Indiana?
Bankruptcy is one of the most powerful tools available to Marion County and Indianapolis homeowners facing foreclosure — but it is also one of the most misunderstood. Filing bankruptcy triggers an automatic stay that immediately halts all collection actions, including a scheduled sheriff sale. But bankruptcy does not eliminate your mortgage debt, and the long-term consequences are significant.
Call (317) 495-3440 — Free ConsultationThe Automatic Stay: Immediate Halt to Foreclosure
The moment you file for bankruptcy — Chapter 7 or Chapter 13 — federal law (11 U.S.C. § 362) triggers an automatic stay. This immediately stops all foreclosure proceedings, including a scheduled sheriff sale. The stay is effective the moment the bankruptcy petition is filed, not when the court issues an order. Your lender must stop all collection activity, including phone calls, letters, and court proceedings. However, the stay is temporary — your lender can file a motion to lift the stay, and the court may grant it.
Chapter 13 Bankruptcy: The Reorganization Option
Chapter 13 bankruptcy allows you to keep your home by proposing a 3–5 year repayment plan to catch up on missed mortgage payments while continuing to make current payments. If the court approves your plan and you complete it, you can emerge from bankruptcy with your mortgage current and your home intact. Chapter 13 is the most common bankruptcy option for homeowners who want to save their home. You must have regular income to qualify, and the plan must be feasible given your income and expenses.
Chapter 7 Bankruptcy: Liquidation and the Homestead Exemption
Chapter 7 bankruptcy eliminates most unsecured debts (credit cards, medical bills) but does not eliminate your mortgage. If you are behind on your mortgage and file Chapter 7, the automatic stay temporarily halts the foreclosure, but your lender will typically file a motion to lift the stay and proceed with foreclosure. Indiana's homestead exemption under IC 34-55-10-2 protects up to $22,750 of home equity from unsecured creditors — but it does not protect against your mortgage lender.
What Happens After the Automatic Stay Is Lifted?
If your lender files a motion to lift the automatic stay and the court grants it, the foreclosure proceeds from where it left off. In Chapter 7 cases, this typically happens within 30–90 days of filing. In Chapter 13 cases, the stay remains in place as long as you are making your plan payments. If you miss plan payments, your lender can move to lift the stay. The bankruptcy does not reset the foreclosure timeline — it pauses it.
Long-Term Consequences of Bankruptcy
Bankruptcy has significant long-term financial consequences. A Chapter 7 bankruptcy remains on your credit report for 10 years; Chapter 13 remains for 7 years. You may have difficulty obtaining new credit, renting an apartment, or qualifying for a mortgage for several years after filing. Bankruptcy requires an attorney and involves court fees, trustee fees, and ongoing compliance obligations. It is a serious legal proceeding that should not be entered into without consulting a licensed bankruptcy attorney.
Indiana Legal References
The following Indiana statutes are referenced on this page. Links go directly to the Indiana General Assembly website.
Frequently Asked Questions
Get Your Free Cash Offer
Tell us about your property and we'll be in touch with a no-obligation cash offer.
Why homeowners choose us
- Speak directly with Vince — not a call center
- Get a real cash number for your property
- Understand your foreclosure options before deciding
- Close in as little as 7 days if you choose to move forward
Written offer
Send Your Info — We'll Be in Touch
Prefer to talk first?
Call Vince directly — no hold music, no call center. Just a straight conversation about your situation and your options.
Call anytime
Free Confidential Call
Confidential · No obligation · Vince answers directly