Stop Foreclosure With A Chapter 7 Bankruptcy

Most people cringe when you mention bankruptcy. This is even true of people who simply cannot pay their bills because they owe more each month than they can possibly pay. Bankruptcy is like admitting defeat and they don't want to consider it.

But bankruptcy laws were actually created to help people get a new start. While there are several types of bankruptcy, there are two types that normally affect home owners: Chapter 7 and Chapter 13. These are the names of the respective chapters of the bankruptcy code.

Chapter 7 is referred to as a liquidation plan and Chapter 13 is referred to as a court ordered payment plan. For this article, I will look at the Chapter 7 bankruptcy and how it may stop foreclosure.

Neither a Chapter 7 or a Chapter 13 bankruptcy allows a person to keep his home without paying his mortgage lender. The mortgage lender will either be paid or ultimately get the house.

With a Chapter 7 bankruptcy, a debtors property that is not exempt by law is sold and the net proceeds are paid to the creditors. Fortunately, in many cases, the property that is exempt is most of the debtors' property. So, many debtors lose very little property. Exemptions vary state to state.

Also, with a Chapter 7 bankruptcy, most of a debtor's unsecured debt, like credit cards, is discharged, meaning that the debtor does not have to pay the debt. Unsecured debt, like a home mortgage, is not discharged and must be paid.

So, how does a Chapter 7 bankruptcy help stop foreclosure?

First, when a bankruptcy is filed, all civil actions, such as foreclosure, are stopped until the bankruptcy court says that they can proceed. This gives debtors (home owners) more time to gather the money needed to pay their mortgage lender.

Second, with the discharge of some debts, debtors (home owners) do not have to pay the debts and have more money with which to pay their monthly mortgage payments. Money that may have been used to pay a credit card bill can be used to pay the monthly mortgage payment instead.

To file a Chapter 7 bankruptcy, people have to be bankrupt. Not everyone qualifies. If you think that you may qualify and that it may help you avoid foreclosure, contact a lawyer licensed in your state. Bankruptcy is very technical and it is best for you to have a lawyer handle it for you.

This article is general information. If you have any questions of any nature concerning bankruptcy and stopping foreclosure, talk with a lawyer licensed in your state.

Stop! Don't blindly chase any option to stop foreclosure. See stop foreclosure options to learn what options you have in your situation. Remember, what works in one person's situation, may or may not work in your situation to stop, avoid, and prevent foreclosure. For more general information, see Stop Foreclosure - Five Options You Need To Know.

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