Bankruptcy was Designed to Protect Property
When you’re dealing with high amounts of debt, things can quickly spin out of control. You miss one payment and you can find yourself suddenly overwhelmed with late fees and high interest rates. Before you know it, you have creditors calling you at all hours and collection notices piling up in your mailbox. You want to resolve your debts, but you’ve fallen too far behind—and now the creditors are threatening repossession of your car or even foreclosure of your home.
The good news? There is help out there for people who want to save their property.
Filing bankruptcy is one option that was designed to resolve debts and protect property.
Filing Bankruptcy Can Stop Foreclosure and Repossession
The U.S. Bankruptcy Code offers two main types of personal bankruptcy protection: Chapter 7 and Chapter 13.
Both types of bankruptcy offer the protection of the bankruptcy automatic stay, which is a court order that prohibits creditors from continuing with any further collection efforts.
This stay is typically issued immediately after a person files a bankruptcy petition and can:
- Stop Foreclosure
- Prevent Repossession
- Halt Lawsuits & Wage Garnishments
- Stop Utility Shutoff
- Silence Creditors
If you’re tired of dealing with creditor harassment or facing a collection threat like foreclosure, it may be time to consider filing bankruptcy.
- Stop Foreclosure
- Prevent Repossession
- Halt Lawsuits & Wage Garnishments
- Stop Utility Shutoff
- Silence Creditors
If you’re tired of dealing with creditor harassment or facing a collection threat like foreclosure, it may be time to consider filing bankruptcy.
Next Step: Chapter 7 or Chapter 13?
Although both types of bankruptcy offer the protection of the automatic stay, each chapter offers different benefits for the filer.
Chapter 7: Typically Better for People With Significant Property
Chapter 7 bankruptcy deals with the discharge (elimination) of unsecured debt. Unsecured debt includes:
- medical bills
- credit card debt
- department store bills
- utility bills
- payday loans
- parking tickets and more
But not everyone can file Chapter 7 bankruptcy. The new bankruptcy law requires that people must pass the means test in order to qualify to file Chapter 7.
The goal of the means test is to make sure that only people who really need their debts eliminated get that help, and others who can afford a debt repayment plan file Chapter 13 instead.
Chapter 7 bankruptcy also isn’t right for everyone.
The bankruptcy automatic stay may temporarily stop mortgage foreclosure or car repossession, but the bankruptcy trustee has the right to sell the debtor’s property in order to repay creditors before the debts are discharged. You could potentially lose your home if you file Chapter 7.
For this reason, many people looking to stop foreclosure or stop car repossession find that Chapter 13 bankruptcy works best for them.
Chapter 13: “Famous” For Stopping Foreclosure & Repossession
Chapter 13 bankruptcy works by setting up debtors on a repayment plan, where they make one lower monthly payment directly to the bankruptcy trustee. (There is zero contact with creditors!)
The monthly payment amount is agreed-upon amount between you (or your bankruptcy lawyer) and the bankruptcy court.
The typical Chapter 13 repayment plan lasts three to five years. And, as long as the filer keeps current with payments, he or she is allowed to keep his or her secured property (like a home or car).
An added bonus to the Chapter 13 repayment plan is that at the end of the repayment plan, if all payments are made on time, the bankruptcy court may discharge (eliminate) the filer’s remaining unsecured debts.
Every Foreclosure Case is Unique
It’s important to remember that each foreclosure case is unique and filing bankruptcy isn’t the right option for everyone facing foreclosure.
There are other ways to stop foreclosure, which may or may not help and can include:
- negotiating your mortgage and late payments with the bank
- taking a second job to have more income to repay the debt
- taking out another loan
It’s important that you examine all of your options, but beware of scams.
Unfortunately, there are some people who are looking to take advantage of your circumstance and steal your hard-earned money.
One of the best ways to avoid scams to check the company out with the Better Business Bureau (BBB) before signing a contract or giving money to a company that’s claiming to save your home.
If you’re facing foreclosure, it can also be a good idea to talk to a bankruptcy lawyer or a professional you trust about your options.
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