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Bankruptcy could provide shelter when you’re facing foreclosure

On Behalf of | Oct 18, 2019 | Chapter 13 Bankruptcy, Home Foreclosure

The thought of losing your house to foreclosure can be terrifying, but handing over your family’s home through bankruptcy doesn’t sound any better. But with the right bankruptcy filing, you could have the answers you need to set your fears aside.

Bankruptcy is a viable option for getting ahead of your financial woes, and it comes in different forms with varied terms. Chapter 13 may be the less popular consumer option, making up just 38% of over 760,000 filings in 2017, but it could be the key to getting your mortgage under control and keeping your Orlando home.

Hedging your debts

With Chapter 7, you’ll likely sell off most of your assets, and you could then use the proceeds to pay creditors. While you can ask for an exemption for your house, your creditor could still hold you to the same mortgage payments you had before the bankruptcy.

With Chapter 13, you can develop a repayment plan for the court to get up to speed with your mortgage payments. And depending on the value of your home compared to your mortgages, you could even strip away a second and third mortgage. The court could transform their debt classification so that you may only need to pay a portion of them.

Debt obligation

Chapter 13 could be your path to financial redemption, but you may need to meet a few requirements before your plan is approved:

  • Minimum balance: Your creditor probably doesn’t want to take a pay cut, regardless of your filing. The court could require you to pay at least as much as they would get if you filed for Chapter 7 and liquidated.
  • Incoming funds: You’ll also need to prove that you can keep up with your plan. You need to show that you have a regular flow of money coming in, with enough disposable income to cover your payments.
  • Time frame: You’ll likely need to keep up on your payments for the duration of the agreement, which will usually last a few years.

With the right filing and a handle on the process, bankruptcy doesn’t have to seem so scary. A proper plan could be a big step toward keeping your home for years to come.

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