Depending on the situation, filing for Chapter 13 bankruptcy can save your home. Chapter 13 bankruptcy can halt the foreclosure process, reduce unsecured debts, and in some cases significantly decrease monthly mortgage payments. Unlike Chapter 7 bankruptcy, which can liquidate many assets, Chapter 13 bankruptcy is an excellent way to keep your most important belongings.
Automatic Stays: After filing for bankruptcy, an automatic stay is placed on debts. An automatic stay halts collection attempts on debts, including foreclosure. This is true for both Chapter 7 and Chapter 13 bankruptcy.
Lien Stripping: For homeowners with more than one mortgage, lien stripping can significantly reduce monthly mortgage payments. To qualify, homeowners must have houses appraised at less than their first mortgage. For example, if a homeowner has a primary mortgage of $350,000, a second mortgage of $50,000 and a home appraised at $300,000, they can use lien stripping. Lien stripping would turn the $50,000 mortgage into unsecured debt, meaning it could eventually be discharged in Chapter 13 bankruptcy. This can reduce monthly payments and make it easier to become in good standing on a mortgage.
Unsecured Debts: Filing for Chapter 13 bankruptcy can restructure unsecured debts, such as excessive medical bills, into lower monthly payments. By lowering monthly payments on other debts, homeowners can focus more attention on paying their mortgages.
Why Discussing Bankruptcy Options with an Attorney is Important
People have differing financial situations, meaning options and individual goals during bankruptcy can vary. Some people may benefit more from Chapter 7 bankruptcy than Chapter 13 bankruptcy. Talking with a bankruptcy attorney can help you find the best solution.