As I have been discussing this week, Chapter 7 bankruptcy offers a tremendous form of assistance to “underwater” homeowners who realize that it is no longer in their best interest to try and keep their homes. If you have been falling behind on mortgage payments, are in need of foreclosure help or have simply accumulated too much additional debt, Chapter 7 allows you the opportunity to receive a fresh start.
With nearly 11 million American homeowners owing more on their mortgages than their homes are worth, one of the first things to note about Chapter 7 is that it can exempt you from tax liability on your house. This means the Internal Revenue Service (IRS) cannot tax you on a discharged deficiency balance. Furthermore, Chapter 7 will wipe out most—if not all—of your debt. While some forms of unsecured debt, such as spousal support or student loans, cannot be discharged, Chapter 7 can eliminate credit card and medical bills.
Another rather common misunderstanding about filing Chapter 7 is how quickly you and your family will have to leave your home. By filing Chapter 7, you and your family are able to stay in the home while you find a new place to live. During that time, you may be able to live rent-free, so you can use the money you save to put towards other bills or even use it to secure a new home.
While bankruptcy is a last resort for many homeowners, you should take advantage of the opportunity to speak with a Washington DC or Maryland bankruptcy lawyer and examine all of your options. If it does not make sense to you to continue paying far more for a home than it is actually worth, you owe it to yourself to see if Chapter 7 will give you and your family a better financial future.