Saving Your Home From Foreclosure: Filing For Bankruptcy May Not Be Enough
The commercials on TV are endless. You can put your life on track and protect your home at the same time by filing bankruptcy. However, is this a factual statement? You may be astounded to hear the truth.
First, let’s look at Chapter 13 bankruptcies. You can file this bankruptcy as a person or on the part of a company. Rather than canceling out debts, as many advertisers proclaim, it instead allows you to propose a repayment plan to your creditors. This repayment plan, if accepted, is often at a much lower total rate than you would pay if you hadn’t filed bankruptcy. Try suggesting new mortgage terms as well for this sort of bankruptcy, because if your offer is accepted, it just might protect your house from foreclosure.
You can also opt for a Chapter 7 bankruptcy. Chapter 7 bankruptcies are only open to individuals and provide no repayment plan. In a way the option allows you to cancel out existing debts. Do not assume this is as easy as it appears, though. Some debts like unsecured credit card balances can be canceled out, while others really can’t be. You can see a ready example of this in the lien built-in to property. You can’t just eliminate something that is thought to be collateral for the mortgage loan you’ve borrowed by simply filing bankruptcy. You might be allowed to exempt all or some of the remaining mortgage on your property by means of a homestead exemption that is available in several states. Check with an attorney to determine the amount, if any, your state will permit you to exempt in this way.
Chapter 7 and 13 bankruptcy options are not without flaw, however. There is no assistance offered in either option if you start missing payments on your house again after filing bankruptcy. Your situation could actually get worse, because this will result in the loss of your house and a dramatic reduction of your credit score at the same time.
In general, it is imperative to think about your options carefully prior to filing any kind of bankruptcy in an attempt to protect your house from foreclosure. A knowledgeable bankruptcy attorney will be able to better illustrate your choices and ultimately determine if filing a bankruptcy is the correct choice for your certain situation.
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