Bankruptcy or Foreclosure? Which Is Your Best Option?
When dealing with a looming foreclosure, you may wish to learn about a couple of bankruptcy foreclosure options that are available. It’s best to get as much information as you possibly can about all the choices that can assist you in making the best decision for your particular situation. In this article I will be discussing two bankruptcy options available to those facing foreclosure.
In some instances filing for a Chapter 7 bankruptcy may be of assistance to you. A Chapter 7 bankruptcy isn’t used to stop foreclosure. It is used to discharge unsecured debt like credit cards, unsecured personal loans and in-store cards for people with a limited income. You may be wondering how that can be of any help to you. Well once you release the debt you owe on these unsecured loans and credit cards, the funds you used to pay these debts off, can now be put towards catching up on your mortgage payments. So while the Chapter 7 bankruptcy won’t stop a foreclosure, it’s a bankruptcy foreclosure option that can free up money so you can pay your mortgage arrears.
A chapter 13 bankruptcy is used to stop foreclosure, and can be implemented as late as the time of the Sheriff’s sale. Once a Chapter 13 bankruptcy is filed, the foreclosure process is stopped through what is called an “automatic stay”. This stops the lender from foreclosing on the property. You do need to be able to prove that you receive a regular income in order to be eligible for this type of bankruptcy foreclosure option. A monthly payment plan is worked out by the courts and is calculated to pay off all previous debt including any mortgage arrears up to that time. This is done at a rate you can afford, while still meeting your living expenses and has to be paid back monthly, over a period of three to five years. You still have to pay your regular mortgage payments in addition to this payment plan, and it is important not to get behind in these payments otherwise the “automatic stay” will be lifted and the lender can start foreclosure proceedings again.
It is wise to research all possible solutions to preventing foreclosure, with bankruptcy being just one option. Before proceeding with any bankruptcy foreclosure option, find yourself an experienced bankruptcy attorney who can advise you on which course of action is the most suitable for your particular situation.
Related posts:
