Facing a foreclosure notice in California? Start here.
Receiving a Notice of Default or Notice of Trustee’s Sale is frightening — but you still have options. Filing bankruptcy immediately creates an "automatic stay," which halts most collection actions, including many foreclosures, while your case proceeds. This breathing room can be decisive when you’re weighing whether to file Chapter 7 (liquidation) or Chapter 13 (repayment plan).
This article explains the practical differences, California timing you must watch, and a short decision checklist to help you identify which chapter may better protect your home and long-term finances.
Quick comparison: Chapter 7 vs Chapter 13 — what matters for a foreclosure
- Automatic stay on filing: Both Chapter 7 and Chapter 13 invoke the automatic stay immediately, which generally pauses foreclosure actions while the court addresses your bankruptcy case. This is often the first practical reason people file when a trustee sale is scheduled.
- Chapter 7 (liquidation): Chapter 7 typically proceeds quickly (often a few months). It can discharge many unsecured debts, but it does not create a repayment plan to cure mortgage arrears — so keeping the home depends on exemptions, equity, and whether you can negotiate with the lender outside bankruptcy. Because Chapter 7 does not set up a plan to repay missed mortgage payments, it is usually not the tool used to catch up and stop a foreclosure long-term. >
- Chapter 13 (reorganization): Chapter 13 creates a court‑approved repayment plan (usually 3–5 years) that can include arrearage payments for your mortgage so you can keep your home while catching up past‑due amounts. Chapter 13 also lets you potentially restructure some secured and unsecured debts and, in some cases, strip junior liens or deal with nondischargeable obligations over time.
In short: if your goal is to catch up on mortgage arrears and keep the house, Chapter 13 is the reorganization tool commonly used; Chapter 7 may help if you plan to surrender the property or qualify for an immediate discharge and have no significant nonexempt equity to lose.
Timing, California foreclosure milestones, and the practical decision checklist
California’s nonjudicial foreclosure process gives homeowners a short set of windows to act: a Notice of Default (NOD) typically follows after about 90 days of missed payments; a Notice of Sale (trustee’s sale) may be recorded after the cure period, and the sale commonly occurs at least 21 days after that recorded Notice of Sale. You generally have the right to reinstate the loan up until a few days before the sale (for example, California guidance notes reinstatement rights up to 5 days before sale in many cases), so timing matters a great deal when deciding to file bankruptcy or pursue alternatives.
Decision checklist (practical steps):
- Where is the sale date? If a trustee sale is scheduled within days, filing any bankruptcy petition can trigger the automatic stay and temporarily stop the sale. That provides time to evaluate Chapter 7 vs Chapter 13.
- Can you pass the Chapter 7 means test? If your income and means-test calculation show you have little or no ability to repay creditors, Chapter 7 may be available; if you fail the means test, Chapter 13 will usually be the next option. The official means-test forms and guidance are published by the federal courts.
- Do you have steady income and the ability to make plan payments? Chapter 13 requires reliable monthly income and a feasible plan (3–5 years). If you can propose a plan that repays arrears and keeps current mortgage payments, Chapter 13 is often the route to stop foreclosure long-term.
- What are your exemptions and equity? If the house has little or no nonexempt equity, Chapter 7 may be a "no-asset" case and let you discharge unsecured debts without losing the home — but Chapter 7 typically does not cure mortgage arrears through the court, so discuss how the mortgage holder is likely to respond.
- Alternatives before filing: Contact a HUD‑approved housing counselor or seek a loan modification, forbearance, short sale, or deed-in-lieu. California self‑help resources and housing counselors can assist with alternatives and warn of scams.
Note: Even though the automatic stay is powerful, secured creditors can move quickly for relief from the stay; courts may grant relief if the lender shows adequate cause. Any bankruptcy strategy should be developed with counsel who can assess deadlines, local practice, and the chances of keeping the home.