Bankruptcy and Foreclosure – Guidelines and Details

It adds another challenge to be addressed.   The economic turbulence has left millions in   state of facing foreclosure. The income level is all time low and the property values yet to recover.  So when one realizes that it’s impossible to catch up with mortgage payments they start thinking “should I file for bankruptcy?” and get help in the foreclosure.  They are not sure of the help bankruptcy can give during foreclosure. This article aims to give information about the help bankruptcy can give in foreclosure. The bankruptcy help expert will identify which type of bankruptcy is better in the given state of affairs which can either help to avoid or temporarily stall the foreclosure. It’s a customized solution and has great financial and legal implication and hence one should consult expert and then decide whether “should I file for bankruptcy?”

Foreclosure

When behind on secured mortgage payments, foreclosure is likely as the lender has legal rights to take the property in lieu of the debts. The first two options available to an individual are short sale and Deed in lieu. Both these have their distinct features, advantages and implications. Once these are appropriately considered a personal bankruptcy attorney can be consulted to work out the third and the last alternative to dig out of financial difficulty and save the house

Bankruptcy

When one files for bankruptcy there is a legal proceeding called “automatic stay” and the creditors and lenders are bound by that. This keeps the creditors away till the chapter 7 bankruptcy foreclosure and all other collection activities are held in abeyance till then. The case goes on for about 3 to 4 months and this gives time to the debtor to work out ways and continue to stay in the house. The lender can also request for a motion and this may reduce the stay duration but cannot override completely.  This is one way to fight foreclosure and buying time. If one files for chapter 13 it is a repayment plan where one has to pay off all the arrearage over a stipulated time period of time which could be about 5 years and If one has enough money to pay off the monthly payment and chapter 13 bankruptcy payments and life returns to normal once paid off. Bankruptcy generally eliminates unsecured and 2nd and 3rd mortgages as these take the last priority. In chapter 7 however all debts even the ones covered by the house are written off. Bankruptcy also does away with tax liability. It should be kept in mind that bankruptcy and foreclosure both hurt the credit but bankruptcy gives a chance to rebuild and one becomes debt free to start fresh.