You can't turn on the news anymore without hearing something about the foreclosure problem here in the US. Included in all this news is people playing the blame game of who's fault the mortgage crisis is. There are also ads for loan modification that has a success rate of about 5%. It's everywhere you look. It might even be going on in your own neighborhood. Many people don't know that bankruptcy is one of the only legal tools that will stop a foreclosure. Once a bankruptcy is filed, and automatic stays put in place that stops all collection activity against the debtor. In laymen's terms, this means that creditors cannot even contact the debtor for any reason without violating the stay. Included in the automatic stay is the power to stop foreclosure, wage garnishment and legal actions including lawsuits and judgments.
Most people kick around all kinds of crazy ideas to try and work something out before they get serious and decide that filing bankruptcy is the only way to go. Many times people bury their heads in the sand and wait until the day of the sale before running to a bankruptcy attorney to file. This is not a very good idea as many bankruptcy attorneys will not even take the case because of the rushed timeframe.
A Chapter 7 bankruptcy will work to stop a foreclosure, at least temporarily. Typically, Chapter 13 bankruptcy is a better tool to use when it comes to foreclosure. Depending on what's causing the majority of the financial problems a Chapter 7 bankruptcy could be used. In some cases, many Americans have become overwhelmed with credit card debt problems. When this is the problem, eliminating all the unsecured debt through Chapter 7 bankruptcy can free up enough money to allow the debtor to catch up on their house payments and avoid foreclosure. Another benefit of a Chapter 7 is it will wipe out any deficiency the debtor might have incurred from a previous foreclosure.
When it comes to stopping foreclosure, Chapter 13 bankruptcy is the king. A Chapter 13 will allow the debtor to negotiate a payment plan with their creditors that will allow them to catch up on all back payments. In a Chapter 13 bankruptcy they prioritize their debts to be paid, with the secured debts at the top of the list, unless the debtor chooses not to keep the home, in most cases they will be able to save it from the pending foreclosure. Whichever chapter bankruptcy you choose, a bankruptcy attorney should be a necessary evil. With all the changes to the bankruptcy code it's become almost foolish to do it yourself. Before making a decision consult a bankruptcy attorney to see if filing bankruptcy will work in your situation.
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