When can I file Chapter 13 immediately after my Chapter 7 discharge?

When can I file Chapter 13 immediately after my Chapter 7 discharge?

There are situations when after being discharged in a Chapter 7 bankruptcy, a debtor is facing foreclosure.  In this instance, it is possible to file a Chapter 13 bankruptcy case so that the debtor can propose a payment plan for the mortgage.  A person is permitted to file Chapter 13 anytime assuming there is no prior bankruptcy case that was dismissed within the year preceding the filing of the case.

After filing the Chapter 13 case, there will be automatic stay and the lenders cannot foreclose on the property.  The debtor will be able to buy time and make a proposal to pay her or his mortgage.

Question:    What is the difference between Chapter 7 and Chapter 13?

Answer:    The basic difference between the two chapters is in Chapter 7 you will be able to discharge all your unsecured debts whereas in Chapter 13, you will be required to pay a certain percentage of your unsecured debts plus 10% administrative cost. You can keep your house under any of the two chapters as long as you keep paying your monthly mortgage.

Question:    How can Chapter 7 help me on my home mortgage?

Answer:    By filing Chapter 7 Bankruptcy there is the automatic stay that will stop foreclosure and all collections effort by the lenders until you are given a discharge by the court.  During this time you can negotiate with the lender to lower the interest rate and monthly payments and possibly the principal amount.  If you have a second mortgage on your house and the house is underwater, the second mortgage has no collateral and you will be personally discharged by filing Chapter 7.  This means that the creditor cannot sue you in court because the personal debt is discharged.  While a lien on a second mortgage may not be erased in Chapter 7 the second mortgage lender may not be able to foreclose because it has no collateral on the house.  Generally the lenders of second mortgage without collateral will just charge off the loan which means the loan is written off in their books.

Question:    Why should I file Chapter 13 if I was already discharged in Chapter 7?

Answer:    The automatic stay for lender to foreclose stops after you are discharged in Chapter 7.  The lender will again continue with the Trustee Sale unless you file a Chapter 13 case and make a proposed mode of payment with the court.  This usually happen in the case of a bank that holds the first mortgage on your house.  They will stop foreclosure while you are in Chapter 7 proceedings.  When you get your discharge in Chapter 7, they will continue to foreclose unless you file a Chapter 13 case.

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