Filing For Bankruptcy
Bankruptcy is controlled by state and federal laws. You should carefully weigh the consequencesof bankruptcy vs. foreclosure. You should talk to a lawyer or approved counselor from theDepartment of Housing and Urban Development before coming to a decision about whether ornot to declare bankruptcy. When bankruptcy is declared the courts issues an"automatic stay", which tells all credit holders to stop collection activities immediately,this includes the lender. This stay remains in place until your case is resolved or until thelender gets permission from the court to "lift the stay" and proceed with the foreclosure. In general there are two types of bankruptcy filings, Chapter 7 andChapter 13.
Filing Chapter 7 Bankruptcy
A Chapter 7 bankruptcy usually lasts around 3-4 months, during which time the foreclosureproceedings are stopped. However, after the 3-4 months the foreclosure procedure will resume.Note that the lender may get court permission to proceed with the foreclosure during thebankruptcy hearing. Filing under Chapter 7 won't allow you to keep your house. Instead itgives you some time to live and save money that you can ultimately use to find a newplace to live. A Chapter 7 bankruptcy will also wipe out any unsecured debt such as credit cards,and medical expenses. It also will not hold you responsible for tax liabilities for lossincurred by the lender at the foreclosure sale.
Filing Chapter 13 Bankruptcy
A Chapter 13 bankruptcy may actually allow you to keep your property, because you make a repayment plan to repay the defaulted amount and the rest of the loan as well. Although Chapter 13may sound like a good idea, you might not be able to afford the repayment plan approved bythe court.
The decision on whether or not to declare bankruptcy is an important one, since bankruptcystays on your credit report for usually up to 10 years. Be sure to discuss the option ofbankruptcy with an experienced bankruptcy lawyer before making a decision.
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