Many people in America these days are having problems making ends meet due to the long recession we've been suffering. Because of the real estate market meltdown many Americans are now upside down on their homes and foreclosure seems to be a common topic for everyone. People suffering from the economic downturn are still trying to protect their homes from foreclosure by filing bankruptcy. When it comes to filing bankruptcy there are different benefits that come with each of the chapters. The best chapter of filing for someone who is trying to stop a foreclosure and keep their home is Chapter 13 bankruptcy. Chapter 7 bankruptcy will also stop a foreclosure, but it might only be temporarily, if the debtor doesn't have the means to get caught up on the back payments by the time the automatic stay is removed. If they don't have a way to pay the arrears the lender will proceed with the foreclosure as soon as the automatic stay is lifted.
When it comes to stopping a foreclosure, Chapter 13 bankruptcy is king. Chapter 13 bankruptcy allows the debtor to negotiate with the court to come up with an affordable payment plan that will be paid over a 3 to 5 year time frame. The debts are paid by priority, with secured debts at the top of the list and all the way down to the bottom are the unsecured debts like credit cards. Whatever balances on the unsecured debts that are left over are discharged at the end of the payment plan. This is why this type of bankruptcy is the best for someone who wants to keep their home and possibly remove the second and third trust deed against the property if the value of the property is dropped. Usually, the courts will make these debts unsecured if the debtor can prove that there is no equity to secure them.
Sometimes in the middle of a Chapter 13 bankruptcy things change in the filer's life. Sometimes their job will require them to move away or a divorce happens because of the financial difficulties. In these cases the individual might need to sell their property. While being in a Chapter 13 bankruptcy the debtor is required to get permission from the bankruptcy judge before selling their home. It usually takes about a month to get a hearing, so it's a good idea to first contact your bankruptcy attorney to allow plenty of time to get the process started.
Before filing the motion the debtor should have an idea of the value of the property and how much is owed on the mortgage. This will be very important to know because of the bankruptcy. If there is equity in the property, then the bankruptcy trustee might want to use it to pay off debts. This should be discussed with the bankruptcy attorney to review the debtor's options depending on the situation. Depending on the financial status of the property it might be in the best interests of the individual to walk from the property and file Chapter 7 bankruptcy to wipe out any deficiency.
This will eliminate any future liability from the property. Most lenders these days send out IRS Form 1099C to make the debtor responsible for taxes from the deficiency on the property. When an individual thinks that they're going to be staying in the home they will try to do whatever is necessary to keep it, even though it might be a stretch to afford it. When things change in their lives the home no longer is as important and becomes a liability to the debtor. Having the expertise of a bankruptcy attorney can be invaluable in this situation to help the individual make the decision to convert to a Chapter 7 bankruptcy or stay and continue on with the Chapter 13.
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