What are the Options For Homeowners Facing Foreclosure? Part 2 – Chapter 7 vs Chapter 13 Chapter 7 Bankruptcy When someone files a Chapter 7 bankruptcy, all assets are frozen. The attorney createswhat is called an automatic stay. Meaning everything "Stays" put. The homeowners can't buy anything, they can't sell anything, and they can't even give away anything. If theytry to sell their home, they couldn't. If they try to give away money in savings, they can't. Any unsecured debt like credit cards, unsecured loans, etc. are eliminated or wiped out. They do not exist anymore. Then the trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out. If the homeowners are in the middle of foreclosure, a Chapter 7 will stop the foreclosure process. Usually banks will then ask the trustee to release the property from the automatic stay so they may continue with the foreclosure process. Once the property has been released from the bankruptcy, the foreclosure process starts right where it left off. Typically you have anywhere from 3-5 weeks until the foreclosure process begins again. Chapter 13 Bankruptcy When someone files a Chapter 13, they don't take all the assets and sell them. Insteadthey take all the monthly payments and discount them for pennies on the dollar. It'slike a debt consolidation plan. Whatever amount is agreed upon has to be paid to thebankruptcy count every month for the next3-5 years. So the homeowners get to keep their house, their cars, and all their assets. Now, as long as the homeowner stays current with the mortgage payments and pays theamount agreed upon, they will be fine. However, if any payments are missed, thetrustee will dismiss the bankruptcy and the foreclosure process will begin again. Christine R. Willard, Realtor, Broker, GRI, CRS, RECS, e-Pro, LMC, PME Greater Triad Homes 1-800-234-367 extension 3816 OR want to know more? |