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In some cases filing bankruptcy may be your last and only hope of avoiding foreclosure, However it is unlikely that a bankruptcy by itself will be your ultimate remedy It is best used to your advantage in combination with other options such as HUD's Partial Claim Program or to delay foreclosure long enough for you to sell your home.
Most Chapter 13 bankruptcies fail! if you file a Chapter 7 bankruptcy. your lender will probably still be able to foreclosure your home.
There are certain limited situations where a bankruptcy might be necessary, or helpful. But before you throw good money after bad and do more unnecessary damage to your credit rating get informed be realistic and understand what a bankruptcy can and cannot do for you. Here are the basic points you need to know:
- For most people, a bankruptcy should be the last option, not the first
- A bankruptcy automatically stops the foreclosure case the minute it is filed.
- You can file a bankruptcy at any time before a foreclosure sale. Only use a bankruptcy attorney that has been recommended to you. Bad bankruptcy advice can cost you more than just the money you paid to get it.
- A Chapter 7 is a straight bankruptcy. It will wipe out your debt including your personal liability on the Note only. More than likely, your mortgage company will still be able to foreclosure the mortgage. After a Chapter 7, your lender cannot obtain a deficiency judgment against you for any amount owed after a foreclosure sale or a short payoff .After receiving a discharge in a Chapter 7 bankruptcy, you must wait 6 years before you can file another one.
- A Chapter 13 is a type of forced repayment plan. Use this only after your lender refuses to give you a repayment plan. On a repayment plan, you will need 1/2 of the arrearage as a downpayment and make 1 ½ payments a month. In a Chapter 13 bankruptcy, there is no downpayment but you must pay both your regular monthly mortgage payment, plus a bankruptcy payment to the trustee. Lenders will normally only agree to a repayment plan of 1 year or less while a Chapter 13 bankruptcy can last 2 or 3 years.
- You can file multiple Chapter 13 bankruptcies unless barred by court order.
- You may be able to convert a Chapter 13 bankruptcy into a Chapter 7.
- You can file a Chapter 13 bankruptcy after receiving a discharge in a Chapter 7 case.
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