Which bankruptcy chapter can help avoid foreclosure?
When New York residents are facing overwhelming debt, they will have a multitude of worries to address. Receiving the endless calls from creditors, comparing income to debt, wondering what the future holds – all can lead to significant stress.
Property owners will wonder what will happen to their homes. Falling behind on mortgage payments and having massive debt can place a person’s property in jeopardy. Foreclosure is a possibility if the debtor does not take steps to address the problem.
While many might be unsure of the prospect of bankruptcy, it is wise to understand how the process can be beneficial to getting into a stronger financial situation and, most importantly, retain their home.
Chapter 13 can be effective in avoiding foreclosure
For people considering personal bankruptcy, they can choose between Chapter 7 and Chapter 13. Chapter 7 is a liquidation in which their property is taken and sold to repay their creditors. Those who do not have significant property can benefit from this as it is completed relatively quickly, their unsecured debts like credit cards and medical expenses are cleared, and they can have a fresh start.
Those who own property like a home would lose it in a Chapter 7. Chapter 13 might be a preferable choice. When a person’s home is in foreclosure or is in jeopardy of being foreclosed upon, Chapter 13 can prevent it and, as time passes, get them current on their mortgage.
Chapter 13 is akin to a consolidation loan. The debtor adheres to a payment plan for three or five years. The amount is based on their disposable income. A monthly payment will be made to a bankruptcy trustee who will distribute it to creditors. It can make the payments lower than they would have been had they not filed and tried to pay every debt individually.
The automatic stay is a valuable aspect of the process. This can give the debtor a respite from the pressure they feel and stop any foreclosure proceeding. Those with a mortgage can benefit as the payments are folded into the plan. Eventually, if they successfully adhere to and complete the plan, they can catch up and have a clean slate.
Anyone can face financial problems and bankruptcy is a solution
People can get into massive debt for myriad reasons. Perhaps they lost their job, had a business fail or suffered an injury or illness that put them in medical debt. It is important to consider all options to get into a stronger financial situation.
Those reluctant to file for bankruptcy should be cognizant of the benefits that can accompany a successful filing regardless of which chapter they use. For people who have property they want to retain and have a steady income to maintain the monthly payments, Chapter 13 could be useful. To have a full grasp of what they can do, consulting with caring professionals who have extensive experience in bankruptcy cases can be helpful with making an informed decision.