Losing your home to foreclosure can have a significantly more negative impact on your credit score than filing bankruptcy, which is why it is in your best interest to contact a Maryland or Washington DC bankruptcy attorney as soon as you need foreclosure help. If you have been unable to successfully negotiate with your lender, receive government help or even sell your home, a lawyer can examine your situation and let you know what options are available to you.
Whether you should file Chapter 7 or Chapter 13 bankruptcy in avoiding foreclosure depends largely on how far behind you are on mortgage payments, whether or not you are currently employed and how much equity you have in your home. The good news is that either a Chapter 7 or Chapter 13 bankruptcy will cause the court to issue an order containing an “automatic stay,” which directs creditors to cease collection activities, including foreclosure sales. It is important to note, however, that the extra three or four months of time an automatic stay can provide are not without exceptions. The lender can filed a motion to lift the stay or sometimes a client might have waited too long to file.
A Chapter 7 bankruptcy will delay foreclosure, but will not solve the problem ultimately. If you can no longer afford the home, a Chapter 7 can help you avoid tax liability if the mortgage company forgives the debt after foreclosure or help you avoid a deficiency. Only Chapter 13 can help the people hoping to keep their homes. Any late unpaid payments can be worked into a Chapter 13 repayment plan, and as long as the homeowner makes all the payments required under the plan, he or she will not only avoid foreclosure, but get to keep his or her home as well.
There are many fine details to the differences between these two bankruptcies when dealing with the threat of foreclosure, and a knowledgeable bankruptcy attorney can help identify which particular option best fits your particular situation. Next week, I will further examine some more of the important distinctions between Chapter 7 and Chapter 13 in dealing with foreclosure.