My New Blog

Homeowners facing bankruptcy are facing a very difficult situation and often time the work "bankruptcy" come into the situation.

Filing either Chapter 13 bankruptcy reorganization or Chapter 7 "straight" bankruptcy will delay the foreclosure sale of your house. But the auction will eventually occur unless you reinstate the mortgage, refinance it or sell the house. When you file bankruptcy, an "automatic stay" stops creditors from collection efforts, including a foreclosure sale.

But your mortgage is a loan secured by your home. Filing bankruptcy won't prevent the home's eventual forced sale unless you either reinstate the mortgage by paying the missing payments or pay off the mortgage by refinancing or selling the home.

Before you can file bankruptcy, you must meet with a certified bankruptcy counselor to discuss your alternatives. Unless you are truly broke, filing bankruptcy could be a major mistake because creditors look very unfavorably on bankrupt debtors.

Chapter 13 bankruptcy, if you now have income, allows you to reorganize and pay off your debts over as long as 60 months. This program gives you time to make up those missing mortgage payments. However, if you miss any payments in your reorganization plan, as approved by the bankruptcy court, then the lender can proceed with the foreclosure.

Chapter 7 is what I call "ultimate bankruptcy." If you have more liabilities than assets, you can then be forced to sell your home and other major assets, with some exceptions such as work tools. Your creditors would be paid, usually pennies on the dollars owed. If you have equity in your home, the mortgage lender will get 100 percent payment as a secured lender.

Don't be railroaded into filing bankruptcy. Talk with a certified bankruptcy counselor to discuss your alternatives. Maybe the situation isn't as dire as you think.

Good Luck.

James Loftis

RealEstate911.com