Bankruptcy Law Blog

Friday, August 21, 2015

Bankruptcy and Foreclosure

Can bankruptcy help to avoid or delay foreclosure?

For clients in danger of home foreclosure, filing for bankruptcy can be a lifesaver. In many situations, filing Chapter 7 bankruptcy can put off foreclosure for a number of months and filing Chapter 13 bankruptcy can even enable a person to save his or her home.

The Process of Foreclosure

Foreclosure results when a homeowner falls well behind on mortgage payments. The bank holding the mortgage does not normally begin the process until the homeowner has missed paying the mortgage for a period of at least three or four months. Once the bank begins the process of attempting to foreclose through auctioning off the property in question, the homeowner, presumably having exhausted other avenues such as a short sale or loan forbearance, may benefit by filing for bankruptcy. Contrary to common belief, some homeowners facing foreclosure may actually be able to improve their credit with a bankruptcy filing.

Types of Personal Bankruptcy: Chapter 7 and Chapter 13 

Chapter 7 and Chapter 13 differ in a few significant ways. Chapter 7 bankruptcy discharges most debts within six months, but some debts remain, most commonly student loans, alimony or child support. People who file for Chapter 7 can't file again for eight years. Chapter 13 bankruptcy, on the other hand, consolidates the homeowner's debts and creates a payment plan. Such a plan typically lasts from three to five years and allows the filer to retain certain assets, such as a house or car and some savings, although laws vary from state to state. Homeowners whose income level is over a certain amount must file for Chapter 13 and once they have filed, are not permitted to file again for two years. Both of these types of bankruptcy can be utilized if your home is in foreclosure. 

If you have hit some serious financial obstacles and are in danger of losing your home, you should consider the possible benefits of filing for bankruptcy. Our knowledgeable bankruptcy attorneys at Padgett & Robertson caringly serve clients in Mobile and Baldwin County, Alabama. Please contact us at (251) 342-0264. 

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

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