The numbers are clear, foreclosure activity continues to rise all across the country and New Jersey is no exception. According to ATTOM’s Mid-Year 2025 U.S Foreclosure Market Report, the percentage of NJ housing units that had a foreclosure filing in the first half of 2025, placed the state among the ten highest in the nation. That number represents thousands of families who are experiencing financial stress and uncertainty about whether they can save their homes.
If you are facing foreclosure or an imminent sheriff sale, bankruptcy could be a solution. Filing bankruptcy can stop the sale, give you breathing room, and create an opportunity for a long-term resolution. There are different avenues to do so, and the best option will depend on each individual's circumstances, which we will shed some light on.
The Automatic Stay
A huge benefit of bankruptcy is the automatic stay. The moment a bankruptcy case is filed, federal law requires all collection activity to stop. This includes:
- Foreclosure proceedings
- Scheduled sheriff sales
- Wage garnishments
- Bank levies
- Collection calls and lawsuits
For homeowners facing a sheriff sale, the automatic stay is often the most effective and immediate way to halt the process. However, the bankruptcy must be filed before the sheriff sale occurs. Once the sale is completed, bankruptcy will not undo it.
While the stay provides powerful relief, it is not permanent. Creditors can request permission from the court to continue foreclosure by filing a motion for relief from stay. If granted, foreclosure activity, including a sheriff sale, may resume. Regardless, the stay gives homeowners valuable time to explore solutions, correct arrears, or reorganize their finances.
Stopping a Sheriff Sale Through Chapter 7 Bankruptcy
A Chapter 7 bankruptcy focuses on eliminating unsecured debt, such as credit cards, medical bills, and personal loans, to give the debtor a fresh start. Filing a Chapter 7 also stops a sheriff sale through the automatic stay. For homeowners, Chapter 7 can provide:
- An immediate pause in foreclosure
- Relief from unsecured debt that may free up income
- Time to negotiate with the lender
- A temporary opportunity to explore loss-mitigation options
However, Chapter 7 is typically not a long-term foreclosure solution. It does not provide a mechanism to catch up on missed mortgage payments, and if the homeowner cannot become current, the lender may request relief from the stay to continue foreclosure. A chapter 7 provides some breathing room, time-wise and the opportunity to quickly cure the debts owed on the property. So for some homeowners, especially those overwhelmed by other debts, Chapter 7 can stabilize finances enough to consider reinstatement, modification, or other negotiating tools with the lender.
Stopping a Sheriff Sale Through Chapter 13 Bankruptcy
Unlike Chapter 7, Chapter 13 bankruptcy is specifically designed to help homeowners save their homes. Chapter 13 allows individuals with regular income to propose a 3 to 5 year repayment plan to catch up on missed mortgage payments while maintaining ongoing monthly payments. Key benefits of Chapter 13 for homeowners include:
- Catch up on missed mortgage payments over time instead of all at once
- Stop a sheriff sale immediately under the automatic stay
- Remove certain judgment liens that impair exemptions
- Consolidate debts into one affordable monthly payment
- Discharge unsecured debts once the plan is successfully completed
- Remain protected from foreclosure as long as plan payments are made
For many New Jersey homeowners, Chapter 13 is the strongest and most practical tool for stopping a sheriff sale and keeping their homes long-term.
Practical Considerations
Timing Is Critical
A bankruptcy petition must be filed before the scheduled sheriff sale begins. Even a last-minute filing, minutes before the auction, can automatically stop the sale.
The Stay Is Powerful but Not Absolute
The automatic stay pauses foreclosure, but it does not erase your mortgage arrears. The bankruptcy process is an opportunity to address those arrears, not a guarantee of home retention unless the plan is completed. Creditors may argue:
- The borrower has no feasible plan to cure arrears
- The property lacks equity
- The lender is not adequately protected
If successful, they may obtain relief from the stay and continue foreclosure. The stay provides the chance for homeowners to plan on how to cure the arrears, but doesn't get rid of them altogether.
Bankruptcy May Provide the Time Needed to Negotiate
Bankruptcy is often the fastest and most reliable method, but other options may apply depending on your situation. Sometimes homeowners simply need a short window to pursue options such as:
- Loan modification
- Many lenders are open to adjusting loan terms to prevent foreclosure. Even while in bankruptcy, homeowners can pursue modification through court-approved programs or direct negotiation.
- Forbearance
- A temporary agreement in which a lender allows a borrower to pause or reduce mortgage payments during a period of financial hardship.
- Mortgage reinstatement
- Paying all arrears and costs to bring the loan current can stop the foreclosure. This is often used in combination with bankruptcy or loan modification.
- Selling the property privately instead of losing it at sheriff sale
- The automatic stay can give that necessary time.
Is Bankruptcy the Best Way to Stop Your Sheriff Sale?
Every situation is different, and the best approach depends on:
- Your mortgage arrears
- Your income and expenses
- Your home’s equity
- Whether you need time, debt restructuring, or both
- Whether a loan modification is realistic
- Whether you want to keep or sell the property
Facing foreclosure or an imminent sheriff sale is overwhelming, and having experienced bankruptcy counsel on your side is essential to navigating the best options for protecting your home. Call the Scura team today for a free consultation.
