(LoanSafe.org) – Many homeowners around the nation are being faced with the threat of foreclosure. Foreclosure is an all to common event and many people just do not know what to do or how to stop it. However, it seems that more and more people have chosen to file fore bankruptcy over the last few years due to their financial struggles. One question we tend to get here on LoanSafe.org quite often is, “Can chapter 7 bankruptcy help me stop foreclosure?”
A chapter 7 bankruptcy is the most common type of bankruptcy in which properties that are non-exempt are sold, and the proceeds of the sale will be divided amongst the creditors. Therefore, the creditors will discharge the debt owed and will not be able to sue the borrower or collect any additional amount. However, this does not mean that it will prevent foreclosure, other forms of bankruptcy such as a Chapter 13 are designed to help borrowers in this situation.
While filing for this type of bankruptcy may have some advantages, especially for those who cannot not afford their debt, borrowers need to be aware of the consequences as well. For example, a Bk will have a dramatic impact on an individuals credit score and may remain there for up to ten years, but to be fair, a foreclosure will also destroy one’s credit rating for years to come. Either event will cause your credit score to come crashing down. Because both options have similar consequences, a Chapter 7 may be a viable solution to some homeowners.
Once you file this type of Bk you will be relieved of any dues to your mortgage servicer. This may allow you to avoid foreclosure all together. By filing Chapter 7 your mortgage company will forgive any of your past dues and you will be able to restart your loan from where you left off, before you can no longer afford to make the monthly payments.
The thing that most people do not consider is the fact that you will be fully responsible for the mortgage payments once the bankruptcy has been discharged. While this event will stop foreclosure proceedings once the paperwork is filed, foreclosure can still take place if the homeowner cannot manage the monthly payments after the Bk has been discharged. That is why it is so crucial anyone who considers filing this type of Bk makes sure they can afford their mortgage once it has been discharged.
So, what’s the significance of being relieved of personal responsibility for paying the mortgage if your lender can still foreclose on you? Well the good thing about this is you will not be held liable for an deficiency judgments if the porperty goes into foreclosure. This will be a huge deal for those who cannot manage their mortgage payments after the bk has been discharged.
By filing a Chapter 7 to save your home, you may be just prolonging the inevitable. This type of bankruptcy can be a valid remedy for a number of people facing foreclosure, but the position you will be in after the bankruptcy is discharged should be the determining factor in deciding if this is the correct solution for you
We at LoanSafe.org are not lawyers and we do not give legal advice. Our goal is to educate you by writing informative mortgage articles that you can learn from. We just state the facts as we know them and encourage you to seek at least 3-4 attorney consultations before you decide to do anything in regards to bankruptcy or foreclosure.