With the cost of living rising and wages remaining stagnant, many people are finding it difficult to survive financially. If you're struggling to pay your mortgage to the point where the bank is threatening foreclosure, you may be wondering whether filing for bankruptcy can help. It ultimately depends on what your goals are.
Save Your Home With Chapter 13
Depending on how far along you are in the foreclosure process, filing chapter 13 bankruptcy can help you fight off the bank's attempt to repossess the property in several ways. First, when you file your petition, an automatic stay falls in place that stops all legal actions being taken against you. The bank cannot continue foreclosing on the home until the stay is lifted, which can take several years in a chapter 13 case.
Second, this type of bankruptcy gives you more time to repay your past-due balance, so you should be completely caught up and current when your case concludes. Since the bank is foreclosing because of your mortgage arrears, eliminating it will take repossession off the table. As long as you stay current, you won't have to worry about losing your home.
Lastly, in certain cases, chapter 13 can reduce your mortgage debt by wiping out liens attached to the home. For instance, if you have a second mortgage that is not secured by the home's value, bankruptcy laws treat the debt like an unsecured credit card and discharge it so that you're not responsible for paying for it after your case ends.
However, chapter 13 may not work for everyone. To qualify for this plan, you must make enough income to cover all your bills. If you don't make enough money, the court may reject your repayment plan, putting you at risk of losing the home. It's best to have a bankruptcy attorney help you with your case to maximize your chances of success.
Reduce Debt With Chapter 7
If eviction due to foreclosure is imminent or you're just not interested in keeping the home, then filing chapter 7 bankruptcy may be the better option. Like chapter 13, you'll enjoy an automatic stay that will prevent the bank from taking the home, but that reprieve only lasts a few months, which is how long it takes a chapter 7 case to end.
Chapter 7 is best for eliminating potential lingering debts associated with the home, such as a deficiency judgment. Since a discharge removes your legal liability for the mortgage, the bank can't come after you for fees, leftover balances, or anything else associated with the loan.
Unfortunately, chapter 7 requires you to pass an income check. An attorney can tell you more about this qualification requirement, and advise you on what you can do to ensure you pass.
For foreclosure defense assistance, contact a local attorney.
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