Foreclosure and Bankruptcy

A foreclosure of a house is a sale of that house at public auction for cash. 

The way it works is this.  When the buyer of the house borrows the money to purchase the house, the buyer signs a document called a Deed of Trust.  That Deed of Trust is really a transfer of ownership of this house to a trustee who has the legal title of the house but can do nothing with the title other than sell the house in the event that the mortgage contract is breached.  As long as the homeowner complies with the terms of the mortgage contract, then the trustee of the Deed of Trust cannot sell the house.  When the house is paid for the Deed of Trust is made void and no longer exists.

If payments are not made, then the trustee can sell the property at public auction for cash in order to pay the note.  Once the property has been sold at public auction, it cannot be retrieved unless the sale itself is for some reason void.

A bankruptcy can stop a foreclosure.  Normally Chapter 13 is used to stop a foreclosure.  Chapter 13 was written primarily for this very purpose.  It provides time for the homeowner to make up the payments that he had missed.

Charles Chesnutt