Declare Bankruptcy, and Possibly Save Your Property
One option that may prove to be a valuable way for you to go is the option of bankruptcy.
There are several types of bankruptcy in the United States, each named for the chapter in the law that describes it. Chapter 13 and Chapter 11 are both reorganizations of a debtor’s finances, while Chapter 7 involves having the court discharge your debts.
Chapter 13 is for individuals and Chapter 11 is generally for commercial enterprises. While both are similar in some ways, they also have many differences. Because you are probably working to prevent foreclosure on personal property, we’ll primarily discuss Chapter 13 here, but this is not legal advice and you should seek the help of one of our competent attorneys, if this option appeals to you.
Under Chapter 13, you propose a plan, in court, to pay your creditors over a 3 to 5-year period. This written plan details all of the transactions (and their durations) that will occur. Repayment, according to the plan, must begin within thirty to forty-five days after the case has started. During this period, your creditors cannot attempt to collect on your previously incurred debt except through the bankruptcy court. In general, you get to keep your property, and your creditors are paid (some times less than they are owed) over the next 3 to 5 years.
One of the most desirable effects of Chapter 13 is that it will stop a foreclosure proceeding. To stop the foreclosure, you can file for Chapter 13 anytime before the sale date of the property. The case is then heard in court and the plan is proposed. If accepted, the plan is carried out and lenders are obligated to comply.
Chapter 13 can be a good option for an individual who has gotten behind, but does have enough income to provide for a viable plan. Obviously, if there is no income, then there is not much that can be done in the way of reorganizing your debt, so it is not the best option for someone who has lost their income and has no immediate opportunities to replace the income. There are also limits on filing if you earn too much money or have too much debt.
Many advocate for Chapter 13 because it also comes with the possibility to wipe out second mortgages and possibly “cram down” the first mortgage.
Once a plan is accepted, you will be paying a trustee the money agreed upon for the next three to five years. At the end of that time, if all payments have been made, the bankruptcy is discharged. A record of your bankruptcy will remain on your credit report for a few years, which is daunting to many, but others argue that it is no worse than having excessive debt and foreclosures detailed on the report.
If you are not able to make the required payments under the bankruptcy plan, the creditors can come back after you for what you owed, plus interest and penalties. For some, this means that you have not solved the problem, only delayed the inevitable. But others feel that it is a very acceptable risk that may prove to be a great one to take.
Again, this option is right for some and not for others. Do your homework and talk to one of our experienced attorneys before proceeding.
Chapter 7 Bankruptcy differs from Chapter 13 in many important ways. Under Chapter 7, you are essentially stating that you are unable to repay your debts and are asking for them to be discharged through the court. In principle, the court takes your non-exempt assets and uses them to pay as many of your liabilities as possible. It then eliminates the remainder of your debts.
Of course, there are many rules and laws that make it more complicated than that. For instance, there are many debts that cannot be discharged by the court, such as child support, court mandated restitution for crimes, recent property taxes and more.
There are also rules about what property you can keep. You are allowed to keep certain exempt property. However, most liens on that property (such as real estate mortgages and security interests for car loans) survive. The value of property that can be claimed as exempt varies from state to state, so you need to check with one of our attorneys to find out whether or not it can help you to save your property.
Again, credit is damaged by a bankruptcy, but many times it is easier to re-establish credit after a bankruptcy than it is to re-establish it after many late payments and a foreclosure.
While we are very experienced with bankruptcy, we are not strictly bankruptcy attorneys. At US Foreclosure Defense Law Group, P.C., we take a very holistic approach. We explore all of the options and then create a plan that will be best for you. Some times that plan includes bankruptcy. Other times, it doesn’t. If filing for bankruptcy is part of the plan, then we can and will take care of it for you. Call us and schedule a free consultation.To set up a free consultation to see if this is an option for you, click here.