House in Foreclosure? Don't Wait Until the Last Minute to File for Bankruptcy

Over the last couple years, a large number of Americans have been faced with losing their homes to foreclosure. It's gotten so bad that many cities are filing for bankruptcy because of the loss of revenue from property taxes due to this problem. Certain areas in California have large numbers of bank owned vacant homes and with no loans and no buyers, they sit empty. Recently, San Bernardino entered into bankruptcy filing because of this problem. It was reported that the city had revenues of $120 million for the year and expenditures budgeted at $166 million. This city has one of the largest foreclosure rates in the state and because of this problem they are having to file for bankruptcy to stave off the creditors.

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There is something to be done for those who are buried in debt and losing their home. Every situation is different and should be discussed with a bankruptcy attorney for different options. For some, it might be a simple as filing Chapter 7 bankruptcy to wipe out a large amount of unsecured debt like credit cards or medical bills. Over the last 10 years many Americans got caught up in a spending frenzy with large balance credit cards, only to find out they couldn't afford it. Some of these were able to afford their house payment and their living expenses until these credit cards started compounding the problem. Before they could live on a budget and the unsecured debt blew the budget to pieces. For these individuals filing Chapter 7 will wipe out all of the unsecured debt and possibly make it affordable to keep the home. A Chapter 7 has generous bankruptcy exemptions that allow a person to protect home equity, personal property, a 401(k) or pension and even the wild card exemption. Most people don't even lose any property when filing bankruptcy under this chapter. Although this is not the norm, it is possible to fall into this category. Most of the time, Chapter 7 bankruptcy will stop foreclosure but only temporarily. Initially, the automatic stay will stop the bank from foreclosing until they file a motion with the court for relief of stay. This will once again allow the bank to proceed as before.

Chapter 13 bankruptcy is more suited for protecting your home from foreclosure. Filing Chapter 13 will allow the debtor to get caught up on back payments while keeping the property. Since debts are paid by priority, a secured loan like a mortgage will get first crack at the finances. All the other debts will end up with crumbs. This is a perfect fit if you need to file for bankruptcy for the reason of protecting property. How a Chapter 13 bankruptcy works is the debtor and their bankruptcy attorney will come up with a workable 3 to 5 year repayment plan that will be submitted to the bankruptcy court for review. Once approved, the bankruptcy trustee will divvy up the money to the creditors. If for some reason, the individual has trouble making the payments, they can have their bankruptcy attorney modify the Chapter 13 plan to make it feasible for the debtor. The bankruptcy court once the debtor to be successful and will do whatever it takes to work with them. So if you want to file for bankruptcy and your houses in foreclosure, Chapter 13 might just be the ticket.

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