If you are behind on your mortgage and facing foreclosure in Wisconsin, bankruptcy may be able to stop the process — at least temporarily, and in some cases permanently. Understanding exactly how bankruptcy interacts with foreclosure under both federal bankruptcy law and Wisconsin foreclosure procedures can help you decide whether it is the right option for your situation.
The Automatic Stay: An Immediate Halt to Foreclosure
The moment a bankruptcy petition is filed, an automatic stay goes into effect under 11 U.S.C. § 362. The automatic stay is a federal injunction that immediately halts virtually all collection actions against the debtor, including foreclosure proceedings. It does not matter whether the foreclosure is judicial or non-judicial — the automatic stay stops it cold.
Wisconsin uses a judicial foreclosure process, meaning foreclosures must proceed through the court system. Once a bankruptcy is filed, the foreclosure court cannot take further action without obtaining relief from the automatic stay from the bankruptcy court. This gives homeowners a critical window of time — sometimes months — to regroup and explore their options.
However, it is important to understand that the automatic stay is not permanent in every case. If the lender files a motion for relief from the automatic stay and the bankruptcy court grants it, foreclosure proceedings can resume. This is more likely in Chapter 7 cases where there is no plan to catch up on mortgage arrears.
Chapter 7 Bankruptcy and Foreclosure
Chapter 7 bankruptcy is a liquidation bankruptcy that can discharge most unsecured debts (credit cards, medical bills, personal loans) but does not include a mechanism to catch up on missed mortgage payments. Filing Chapter 7 will temporarily stop foreclosure through the automatic stay, but unless you can bring your mortgage current or negotiate with the lender, the foreclosure will ultimately resume once the stay is lifted or the bankruptcy case is closed.
For homeowners who want to keep their home, Chapter 7 alone is generally not a long-term solution to foreclosure — though it can buy time and eliminate other debts that free up cash to address the mortgage. For help choosing between Chapter 7 and Chapter 13, read our comparison guide on Chapter 7 vs. Chapter 13 bankruptcy in Wisconsin.
Chapter 13: A Powerful Tool to Save Your Home
Chapter 13 bankruptcy is a reorganization bankruptcy that allows debtors to propose a repayment plan lasting three to five years. It is the most powerful tool available under bankruptcy law for homeowners facing foreclosure, because it allows you to cure mortgage arrears over the life of the plan while continuing to make regular monthly mortgage payments going forward (11 U.S.C. § 1322(b)(5)).
Here is how it works: if you are, for example, $15,000 behind on your mortgage, you can propose a Chapter 13 plan that spreads that $15,000 over 60 months — roughly $250 per month — while also making your regular monthly payment. As long as you make your plan payments and stay current on ongoing mortgage payments, the lender cannot foreclose. If you successfully complete the plan, your mortgage is brought fully current and you keep your home.
Chapter 13 also strips away certain junior liens (second mortgages or home equity lines of credit) if the value of your home is less than what you owe on the first mortgage — a process called “lien stripping” — which can significantly reduce your total mortgage debt.
Wisconsin Foreclosure Timeline and How Bankruptcy Fits In
Wisconsin’s judicial foreclosure process typically takes six months to a year from the date of the first missed payment before a sheriff’s sale occurs. After the sheriff’s sale, Wisconsin provides a redemption period — in most cases, six months — during which the homeowner can redeem the property by paying off the full amount owed. During this entire period, a bankruptcy filing can stop or delay the process.
The earlier you file, the more options you have. If you wait until after the sheriff’s sale, the redemption period may still be protected by the automatic stay, but the window of opportunity narrows significantly.
What Happens After Bankruptcy?
If you complete a Chapter 13 plan, your mortgage arrears are cured and the loan is reinstated. If you filed Chapter 7 and surrendered the home, the foreclosure will eventually conclude and the deficiency (if any) will be discharged in the bankruptcy. If you received a discharge but did not reaffirm the mortgage, you may be able to remain in the home while not making payments until the foreclosure is completed — though this depends on the specific facts and lender behavior.
Contact Attorney Christopher S. Carson
Facing foreclosure is frightening, but you may have more options than you think. Attorney Christopher S. Carson has more than 22 years of experience helping Wisconsin homeowners explore bankruptcy as a tool to save their homes or manage the foreclosure process. Call today for a free consultation: (262) 860-8932.