Bankruptcy can stop the foreclosure of your home

Bankruptcy can stop the foreclosure of your home

By Atty. Crispin Caday Lozano

For both bankruptcy chapters, the automatic stay stops the foreclosure process as soon as the bankruptcy petition is filed. Past due payments must be made current. If the mortgage company completes the foreclosure sale before the debtor files their Chapter 7 or Chapter 13 Bankruptcy petition, the debtor may lose their home.

Homes may be preserved under Chapter 7 Bankruptcy by using the state or federal allowable homestead exemption if there is not substantial non-exempt equity. Chapter 13 Bankruptcy may also allow the debtor to protect and exempt a portion of the equity in their home from the bankruptcy process and repay late mortgage payments over a 3 to 5 year period.

Q. What is the time frame when my credit card debts will be discharged?

Chapter 7 Bankruptcy can generally be completed 90 days from the date of the 341 Meeting of the Creditors. Debts which are immediately discharged under Chapter 7 Bankruptcy can include credit card debt.

Under Chapter 13 Bankruptcy the debtor creates a 3 to 5 year debt bankruptcy repayment plan to repay creditors; payment amounts are based on a strict expense-to-income formula. After the debt repayment plan is complete, all debts included in the plan are discharged. Debts not included in the plan and non-qualifying debts (i.e. student loans, child support, and spousal support) are not discharged. Liability for the debt ceases when the plan is completed and the court enters a discharge order.

Q. Will my personal loans which are unsecured be discharged immediately?

Chapter 7 Bankruptcy will discharge personal, unsecured loans if they are for credit extensions which were based on the creditor’s evaluation of the debtor’s ability to pay and the loan is not secured by any property of the debtor.

Chapter 13 Bankruptcy is a repayment plan and unsecured debts, such as personal loans, will be included in the plan. A Chapter 13 Bankruptcy trustee is assigned to enforce the 3 to 5 year bankruptcy plan and will pay the creditors according to the plan. General unsecured debt (credit cards, medical bills, personal loans, utilities, payday loans and personal signature loans) may not be paid in full. If the unsecured credit balance was not paid in full by the end of the plan, generally, the remaining balance is eliminated or discharged.

Q. Will I be able to keep my car?

For Chapter 7 Bankruptcy state or federal exemptions may protect a vehicle, but under certain conditions, the vehicle may be liquidated by the trustee unless arrangements are made to either redeem (pay the secured creditor the value of the collateral in exchange for a release by the creditor of their lien) or reaffirm the debt (sign a reaffirmation agreement and continue to make car payments).

For Chapter 13 Bankruptcy, vehicles may be kept as long as the debtor makes the necessary payments under their bankruptcy payment plan.

Q. What debts are not discharged in bankruptcy?

Filing Chapter 7 or Chapter 13 Bankruptcy does not discharge all debts including student loans, current tax obligations, debts from willful and malicious injuries to persons or property, debts for personal injuries caused from the debtor’s operation of a motor vehicle while under the influence of alcohol or drugs, debts from fraudulent actions, Debts that were not included in the bankruptcy schedules in time to allow creditors to file proofs of claim (unscheduled debts), and child support or spousal support.

Bankruptcy Basics

  1. Bankruptcy will actually improve your credit within one year because your unsecured debts are discharged. Although the bankruptcy will be in your records for 10 years, not filing bankruptcy will make your credit even worse until most your debts are paid.
  2. If you are being sued by your creditors, most money judgment can be eliminated in bankruptcy.
  3. Collection actions continue and you can be sued if you are in debt settlement.
  4. Chapter 7 will eliminate all unsecured debts. If you are near retirement age, you must eliminate most of your debts.
  5. Bankruptcy will stop foreclosure actions. If your trustee sale date is 10 days before, you can still file for bankruptcy.
  6. If your salary is being garnished, you have a court case about debts or you are being harassed by creditors, bankruptcy can stop garnishment, court cases, harassing creditors and eliminate the debt.
  7. Bankruptcy is cheaper, faster and safer than debt settlement which has no guaranteed success.
  8. Preserve your health, eliminate stress and live a happy life by eliminating your debts which is the root of all problems.

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