Bankruptcy Information
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What is Bankruptcy?
An action filed in a federal bankruptcy court that allows a creditor to reorganize or discharge credit obligations due to insolvency. A property owner may restrain foreclosure action by filing bankruptcy.
The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13.
Chapter 7
A Chapter 7 bankruptcy wipes out all a person's eligible debts usually within four months. In the vast majority of cases the debtor has no assets that he or she would lose. This type of bankruptcy gives a person a relatively quick "fresh start". Chapter 7 is liquidation bankruptcy in which a debtor's nonexempt assets are gathered together and given up or sold for the benefit of creditors in order of their priority. Priority creditors get much of the cash, if any. Their debts are not discharged. Secured creditors receive continued payments or the asset that served as collateral for the loan. Unsecured creditors are usually given little or nothing in a Chapter 7 bankruptcy.For more information on Chapter 7 bankruptcy, go to: US Bankruptcy Courts
Chapter 13
Chapter 13 bankruptcy is a reorganization plan for individuals that allows them to pay off part of their debts over a period of three to five years. To qualify for Chapter 13, an individual must have secured debts under $807,750 and unsecured debts under $269,750. Under Chapter 13 the debtor keeps all of their property, but in return they make regular payments to a trustee, who distributes the payments to the creditors.
Chapter 13 Bankruptcy remains a highly effective tool at stopping foreclosure on your home or other real estate. The "wage earner" bankruptcy is the only form of bankruptcy with a repayment plan for individuals with regular employment, including self-employment. Past due taxes may be handled this way as well.
With a chapter 13, you "catch-up" on mortgage payments in arrears over three to five years. I may even be able to negotiate a forbearance agreement or loan modification with your lender - without resorting to bankruptcy. If you have fallen behind in a payment plan previously made with your home lender, a chapter 13 bankruptcy can stop the foreclosure sale and save your home. Sometimes what may appear to be an extreme measure, like bankruptcy, may be the best course-of-action. But don't wait - call right away. Time is your enemy once you fall behind in your payments.
For more information on Chapter 13 bankruptcy, go to: US Bankruptcy courts
Will Filing Bankruptcy Stop the Foreclosure Process?
Filing a Chapter 7 bankruptcy temporarily stalls your lender's right to foreclosure, until it gets permission to go forward with the foreclosure proceedings. However, doing so could have other very serious consequences.We caution against falling for some of the schemes that have been developed that entice a homeowner who is facing foreclosure to transfer a portion of the title to his home to a third person, who then files for bankruptcy. While that may temporarily delay the foreclosure courts are getting wise to the scheme and the delay may be very temporary. Typically the homeowner pays large fees and loses his or her home anyway. Some of the people engaging in such schemes have also been charged with fraud.
If bankruptcy seems to be an option, consider a Chapter 13 or "wage earner" repayment bankruptcy as an alternative to a Chapter 7 straight bankruptcy. Under a Chapter 13 plan, it is possible to make up the missed payments out of your income through the repayment plan.
If you face foreclosure, bankruptcy may or may not make sense, depending on your other obligations and income sources, and the advice of an attorney will be very helpful.
Other Resources
Need Help Now?
You can apply now for our foreclosure help. There is no obligation and it is free to apply. We will evaluate your application and have a response for you in 48 hours! (72 hours if on a weekend)Call us at (800) 275-7420 or fill out our online form and we will have a foreclosure consultant contact you within 48 hours.
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