Chapter 7 Bankruptcy Can Delay or Stop Foreclosure
Chapter 7 bankruptcy is more often used to delay a foreclosure than to block it permanently. You’re more likely to be able to keep your house if you file for Chapter 13 bankruptcy. But even if you think you’ll need to give up your house sooner or later, Chapter 7 bankruptcy can still be very valuable when you’re facing foreclosure. A Florida foreclosure lawyer that is also trained in the bankruptcy code is your best weapon.
Filing for Chapter 7 bankruptcy offers different benefits, depending on your situation.
If you want to keep your house and are current on your first mortgage, you can get other debt (including a second or third mortgage, in some cases) canceled, freeing up money to put toward payments on your first mortgage.
If you decide to give up your house, you can:
- delay foreclosure proceedings for two to four months, and
- get all or most of your debts permanently canceled so that you can have a fresh start after foreclosure.
Bankruptcy is a wonderful way to deal with the various liabilities that you might incur while holding off a foreclosure or going through one. Simply put, with a few exceptions, the debts all go away. And that’s not all, as they say in the late-night TV ads. Credit card debts, medical bills, and most money judgments arising from lawsuits over breach of contract or negligence go away as well. So if you are up to your neck in these types of debt, bankruptcy is something to seriously consider, whether you want to free up income to pay your mortgage (by decreasing your debt load), or whether you are headed towards a foreclosure and want to get a fresh start.
Of course, bankruptcy is not for everyone. There are the obvious psychological barriers; no one likes to admit that bankruptcy is really necessary. And if you’re concerned about rebuilding your credit as soon as possible, bankruptcy might best be avoided entirely. In these turbulent times, it’s impossible to tell what kind of a hit bankruptcy will have on your credit or for how long.
If you’re interested in modifying your mortgage, see a HUD-approved counselor before you file for bankruptcy. If you are seeking a modification of your mortgage principal or payments, or are attempting to refinance your current mortgage either in or out of the government programs described in Ch. 4, talk to a HUD-approved housing counselor before filing bankruptcy. It’s unclear whether a modification can proceed while a bankruptcy is pending. It’s also unclear whether you can modify a mortgage after your bankruptcy if, as usually happens, you discharge the mortgage debt in your bankruptcy and only the lien remains.