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Stop Foreclosure Using Bankruptcy

Nowadays, you can’t even turn on the TV or pick up a newspaper without hearing about the declining real estate market and increasing foreclosure rates. This is no longer a rare occurrence, but a reality for many Americans and their neighbors. Recently reported, because of the high debt ratios many people have, there is now one in five chance of ending up in foreclosure. When people get deep in credit card debt, they find themselves getting further and further behind. Filing bankruptcy might be the only way out to stop the financial hemorrhage.

Chapter 7 Bankruptcy

Many individuals consider selling their home before it ends up in foreclosure, because they are so far behind on their payments. The problem with this in today’s declining real estate market is the values of homes in many cases have dropped lower than the amount owed. To sell the home, the lender would need to approve a short sale for the debtor to get out from under the debt of the house. The downside to short selling is many lenders will 1099 the debtor for the deficiency of the loan, giving the debtor tax problems. This is where filing bankruptcy is king. A Chapter 7 bankruptcy will eliminate any deficiency that is owed to the lender. This will allow the debtor to walk from the property with no liability following them. Sometimes the reason a debtor can’t afford their house payment is because of a large amount of unsecured debts, like credit cards. In this circumstance, the debtor can file chapter 7 and use the automatic stay of bankruptcy to stop the foreclosure and wipe out all their unsecured debt, freeing up enough money to be able to afford their home.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is probably the best chapter to file when trying to protect property. When a Chapter 13 bankruptcy is filed the automatic stay is put in place and all collection activity must stop, including foreclosure. A Chapter 13 bankruptcy will allow the debtor to catch up on back payments over the Chapter 13 payment plan timeframe. Along with the mortgage, all of the person’s debt will be put in a 3 to 5 year payment plan with the priority of paying secured debts first.

Whichever type of bankruptcy you decide on, the bankruptcy discharge will release you from all liability on all the debts included in the bankruptcy filing. When using bankruptcy to stop foreclosure it’s important to consult with a local bankruptcy attorney to evaluate your situation before filing.

Ideally we would all like to be living our dreams and enjoying a good quality of life. However in today’s economy it might not be as easy as it sounds. Anyone could be vulnerable to bankruptcy and needs to understand the personal bankruptcy code. Fill out the form below to speak with a bankruptcy attorney in your area for a FREE NO OBLIGATION CONSULTATION and see if bankruptcy can help you get on the road to being debt free.