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

Texas and Florida are the only states in the Union that provide an unlimited homestead exemption. That means that no matter how much your house is worth, one cannot lose it in a bankruptcy.

It is easy to have a homestead in Texas. There are only two basic requirements for the standard urban home: 1) one must own it personally (not through a trust or a corporation) and 2) one must live in it. There are exceptions relating to living elsewhere and renting it, or a rural homestead that is much larger than the urban home and others.

However, if the debtor has placed more than approximately $140,000 of actual equity (not interest payments) into his homestead during the 1215 days prior to filing bankruptcy, he can lose the excess.

Also, if the debtor files bankruptcy he must have lived in Texas for more than 730 consecutive days in order to take advantage of the Texas exemptions.

Dallas 2009