How Bankruptcy Can Save You From Foreclosure
By: Bass.Franklin | Posted: 14th October 2010
The housing bubble that burst in 2008 has yet to recover, continuing to shackle millions of Americans with upside down loans and astronomical monthly payments. Faced with abandoning their homes, many homeowners have very few options. One solution many turn to when they are unable to make payments on their home is foreclosure. In foreclosure, the homeowner effectively gives up ownership of their home allowing their lender to sell the home to the highest bidder in order to recoup on the investment. However, other individuals turn to bankruptcy to avoid foreclosure all together.
When an individual files for bankruptcy, they immediately receive an automatic stay, which tells creditors that they cannot collect on debts from the individual. The automatic stay is effective even in foreclosure, announcing to the creditor that the foreclosure cannot be completed while the bankruptcy pending.
In Chapter 13 bankruptcy, debtors are able to pay off late, unpaid payments over the length of the bankruptcy plan -- up to five years in some cases. If you are able to complete these payments, you’ll avoid foreclosure and be able to stay in your home. For individuals with second and third mortgages, Chapter 13 bankruptcy can eliminate these loans all together. Since your first mortgage is secured by your home, second or third mortgages can be classified as unsecured and are thus dischargeable in bankruptcy. However, interest rates have increased so much, even a discharge of second and third mortgages, late fees, and unpaid payments will not be enough and will eventually force you out of your home. You need to leave behind your home, but can do it in a more intelligent way than foreclosure.
In this situation, Chapter 7 bankruptcy is the solution you are looking for. In Chapter 7, you still have to give up your home, however it will stall the proceedings for several months allowing you to live in your home for free as the bankruptcy is pending. During this time you can save up money for a new place after you leave. Additionally, after Chapter 7 is completed, you will be free of debt all together including credit card, car payments, and medical bills along with other debts associated with home ownership including second and third mortgages.
While Chapter 7 or 13 bankruptcy might be attractive options that would work for you, unfortunately not everyone is eligible. That is where it is important to talk to a professional who can assess your situation, give you honest advice with your best outcome in mind, and who knows your local law.
If you are seriously considering bankruptcy and you live in Southern California, contact the firm that focuses exclusively on California bankruptcy laws, Borowitz & Clark L.L.P. The Los Angeles bankruptcy attorneys at Borowitz & Clark know what they’re doing, because bankruptcy is all they do. Unlike many firms, they never leave a paralegal or secretary in charge of a case. That’s why their cases succeed at such a high rate—even higher than many other bankruptcy firms. For a free consultation, contact the qualified Los Angeles bankruptcy attorneys from Borowitz and Clark toll-free at 800-509-3200, or visit www.blclaw.com.
Brian Reed. Los Angeles bankruptcy attorneys To find an effective bankruptcy lawyer in the Los Angeles, California area with a successful track record, contact the law office of Borowitz and Clark at 800-509-3200.This article is free for republishing
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Tags: money, highest bidder, debts, chapter 13 bankruptcy, chapter 7 bankruptcy, creditor, interest rates, loans, foreclosure, mortgages, creditors, late fees, first mortgage, proceedings, housing bubble, upside down