subject: Preventing Foreclosure - File for bankruptcy [print this page] Preventing Foreclosure - File for bankruptcy
Bankruptcy is a way for individuals to obtain time and use a court administered procedure to either:
1. Discharge their debts (Chapter 7 Bankruptcy); or
2. Work out a plan to repay their debts over time (Chapter 13 Bankruptcy).
The Bankruptcy Code can be found in Title 11 of the U.S. Code. The Bankruptcy Code stops all collection efforts against the debtor, but only temporarily.
"In recent years, the bankruptcy laws have been revised, restricting the use of this authorized remedy and making it more complex to undergo the process."
Some property owners may possibly think that filing bankruptcy will save their property; however, what the procedure actually does is acquire some time until the matter can be sorted out. If the bankruptcy process is completed (i.e., a judgment is entered), debts will possibly be discharged or restructured. The bankruptcy will appear on the homeowner's credit record for ten years.
House owners in foreclosure should obtain the counsel of an attorney specializing in this area of law to determine how they might benefit from the procedure, and with the help of the legal professional, decide if they need to file bankruptcy or not.
Things to think about are how your credit report will be affected by a bankruptcy compared to a foreclosure (foreclosure is usually viewed much more negatively by credit companies.) Also, I am conscious of situations in which homeowners have employed the procedure successfully to acquire additional time in their house without actually completing the procedure.
In the event the lender will not offer a time-extension, submitting bankruptcy may provide the house owner with the needed time to complete his/her negotiations with the loan provider or to complete a transaction with a buyer of the property. These issues should be discussed with the lawyer to obtain a clear understanding of the homeowner's circumstances, the desired outcomes, and the procedure that needs to be followed. If the bankruptcy case is not properly handled by the house owner and attorney (and even if it is), the home owner should be aware that he or she might lose control over the decisions affecting their house.
Chapter 7 vs. Chapter 13 Bankruptcy
In Chapter 7, the foreclosure trustees are in a position to petition the bankruptcy court to enable the foreclosure auction to continue. In Chapter 13, the Bankruptcy Court will most likely order the home to be sold, unless the owner can find the money for their payment plan. Alternatively, if the home owner can afford the payment plan, then they may have been much better off pursuing forbearance, loan modification, or refinance, instead of bankruptcy.
If considering bankruptcy, we would recommend you seek the guidance of a competent lawyer. Even though many view a foreclosure much more harshly than bankruptcy, it should be noted that a foreclosure will appear on your credit report for 5 years, but a bankruptcy will appear on your credit report for 10 years. Subsequently, anyone reviewing your credit history report may select not to extend credit, rent property to you, etc, and they are not required to do so. For more information on bankruptcy, you may want to go to - Bankruptcy Courts
How to prevent foreclosure - Do nothing - Allow property to be offered in auction
This is probably the least appealing of all choices as a way of stopping foreclosure. Not only will the homeowner lose his or her home it will also destroy his or her credit at the same time.
"With all the available choices, it is unfortunate when a foreclosure is resolved this way. That is why it is so essential for the home owners in foreclosure to get the help they need."
If anyone contacts you and suggests that you do nothing and allow your house to be offered at auction it might be simply because they plan to buy your residence.
I have heard stories where house owners receive these calls and are told that they will get money back right after the auction because someone plans to buy the property at or near full market value. Unfortunately this is not generally the scenario as most properties selling at auction are sold for the amount of debt only, or less.
Visit my website to get more information about how to best resolve your situation.
