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Debt Relief – Insolvency – Bankruptcy Information » Bankruptcy Help, Foreclosure Help, Foreclosure Law, Insolvency » Can I Stop My House Foreclosure if I File Bankruptcy?

Can I Stop My House Foreclosure if I File Bankruptcy?

Article by Lisa Jones
Real estate has been steadily declining since 2007 from their previous highs. Anyone who bought a house in or before the year 2000 should be okay. However, this is dependent upon the fact of them taking equity out or if they refinanced their houses. If these homeowners do not have a steady job, they could be in for a hard time. Some of them had subprime loans to grab their property’s equity to use it for buying an expensive car or boat. The prices have dropped so drastically now that these people are underwater with their mortgages and they owe more on the house than it would sell for. Today, a lot of these loans are becoming due and many people are beginning to panic, trying to think of what to do or just can’t pay their mortgage payments. Filing bankruptcy might be one choice if the person has a bad enough financial situation. Bankruptcy offers people some different options, which can help them according to their situations. Chapter 7 bankruptcy is recommended for those who have a lot of the unsecured debt such as payday loans, medical bills and credit cards. Now, Chapter 13 bankruptcy is the one to use to stop foreclosure, along with the debtor being able to reset payment amounts with their creditors so they can handle paying them back better.
When examining all the choices a homeowner could do with their mortgage, and the person has the money to pay it and stay current, then the bankruptcy would not be a way to handle it. One choice is strategic default, which is just stopping to pay on your house. The bad thing about this is that there isn’t a good way to know how the bank will react when you do stop paying. It might just foreclose on this property.

Another choice is doing a short sale to get out of owning the property. The lender needs to agree though to the terms of the short sale for it to go through. Many of the lenders will sue a debtor after a short sale for the deficiency or at the very least submit a Form 1099C to the IRS charging the debtor for this missed income. Before making this type of decision have a consultation session with a bankruptcy attorney as it could have an impact on the benefits the debtor would get filing bankruptcy.
If a person is not able to make his or her house payment these days, he or she should not wait around for the bank to foreclose. The banks already have so many houses they are stuck with that are not selling quickly, they are taking longer to foreclose on properties. The banks have not had enough motivation though, to make permanent loan modifications for these underwater homeowners. A Chapter 7 bankruptcy will stop the foreclosure; however, in a lot of cases this is just temporary. If a person needs to modify their home mortgage, he or she should look into filing the Chapter 13 bankruptcy. The Chapter 13 filing will get the debtor noticed by the mortgage company. In most instances, when the debtor is underwater on his or her property, a second trust deed is involved, the court many time will allow the second to be stripped away and made into an unsecured debt. This can be enough sometimes to help the debtor better afford his or her mortgage payment. If this does not work, a bankruptcy attorney will negotiate with the debtor’s creditors to get a more affordable payment for the debtor.

 

The author formed FilingBankruptcyNow.Com that specializes in filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy and helps individuals with debt problems and helping stop foreclosure by putting them in touch with a local bankruptcy attorney. Check our website for more answers to bankruptcy questions for a debt free future.

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