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Understanding How A Bankruptcy Can Influence A Foreclosure



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By : Abraham Ciwolski    99 or more times read
You've probably seen the commercials on television. By filing for bankruptcy, you can help put your life back on the right track and even save your home in the process. But, is this an accurate statement? You may be amazed to hear the answer.

Let us tackle Chapter 13 bankruptcies first. You can file this bankruptcy as an individual or on behalf of a business. It allows you to propose a reimbursement plan to your creditors, rather than canceling out debts, as many advertisers claim. You'll probably pay a whole lot less than you otherwise would have if this reimbursement plan is approved, which makes filing this bankruptcy a significant benefit. You can suggest new mortgage terms with your lender and, if approved, you may possibly be able to save your home if you file a bankruptcy in this way.

You can also choose a Chapter 7 bankruptcy. Only individuals can file under Chapter 7 and it provides no repayment plan. In a way the option allows you to cancel out existing debts. Do not assume this is as simple as it seems, though. While many debts like those due on unsecured credit transactions can be eliminated, others cannot. You can see a ready example of this in the lien included with your property. You can't just eliminate something that's considered collateral for the mortgage loan you have borrowed by simply filing bankruptcy. In several states, there is a homestead exemption that may allow you to exempt all or some of the existing mortgage on your property. Consult with a lawyer to determine whether or not this is a realistic approach by which to protect your house.

Chapter 7 and 13 bankruptcy options are not without flaw, unfortunately. Neither the Chapter 7 nor the Chapter 13 bankruptcy you file will help you, for instance, if you start missing payments again on your home. This will result in the loss of your house and a reduction in the strength of your credit score at the same time, so it might put you in a worse situation than you were in before filing.

In general, it is important to think about your options carefully before filing any sort of bankruptcy in an effort to protect your house from foreclosure. A knowledgeable bankruptcy lawyer can tell you if filing bankruptcy is the correct option and will also be able to better illustrate any other options that may be available to you.


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