Bankruptcy Options When Facing Foreclosure

The economy remains sluggish, and many homeowners continue to lose their homes.  While the mortgage meltdown may have slowed, many Americans continue to lose the battle to hold onto their family home.  One in every 200 homes in the U.S. will be lost in foreclosure.  An easier way to understand the scope of the problem is that in any three month period an average of 250,000 families lose their home in foreclosure.  The loss of a family home can be a devastating event because it represents more than just the lose of a physical building or valuable asset though it certainly also represents both of these things.  The loss of a family residence in foreclosure means losing one’s home – the place people start their families and raise their children.

Many people who struggle to make their mortgage payment and feel themselves falling behind become discouraged.  However, there might be options and strategies that an experienced Kansas bankruptcy attorney may be able to share that may permit a person to keep one’s home.  A Kansas bankruptcy may be an option that permits you to keep your home.  We have provided an overview of some options that may be available depending on your situation.

Chapter 7 Bankruptcy: Sometimes homeowners struggle to make their mortgage payment because they have an overwhelming amount of debt or are subject to aggressive collection efforts.  A Chapter 7 bankruptcy can allow a debtor to eliminate much of one’s unsecured debt including credit card debt, medical bills, unsecured credit lines, unpaid utility bills and similar unsecured obligations.  A debtor may also use a Chapter 7 bankruptcy to stop wage garnishments, bank levies and other debt enforcement actions that reduce the cash flow needed by a debtor to make one’s mortgage payment.  The point is that much of a person’s unsecured debt load may be extinguished through a Chapter 7 discharge making more funds available to make one’s mortgage payments and preserve one’s home.

Chapter 13 Bankruptcy: A Chapter Bankruptcy differs from a Chapter 7 bankruptcy because it involves making payments toward one’s debt including unsecured debt over a 3-5 year period rather than simply having the debt discharged.  As with a Chapter 7, a debtor may have the balance of one’s unsecured debt discharged if the plan is completed and all plan payments are made.  Homeowners are specifically well suited for Chapter 13 relief.  The Chapter 13 is designed to permit a homeowner who is behind on mortgage payments to include the arrearages on the mortgage in one’s repayment plan.  If the homeowner has sufficient income to make the current mortgage payments and plan payments including mortgage arrearages, the homeowner may be able to keep one’s home by filing a Chapter 13 bankruptcy.

Chapter 13 + Chapter 7 Combination: A Chapter 13 and Chapter 7 are both filed in sequence by a debtor.  If a debtor qualifies under the means test, the Chapter 7 this can eliminate much of the debtor’s unsecured debt.  This may be critical to the debtor’s ability to qualify for Chapter 13 relief.  One of the most common reasons that Chapter 13 relief is not available is that a debtor lacks sufficient income to feasibly fund a plan.  Once a debtor files a Chapter 7 bankruptcy and eliminates much of their unsecured debt, it can make the plan payments in a Chapter 13 lower so that the person seeking relief has sufficient income to fund a Chapter 13 plan.

Non-Bankruptcy Alternatives: While bankruptcy often provides the best option to protect one’s home from foreclosure, there are other options that may be available in certain situations including a short sale, deed in lieu or other alternative.  However, these alternative strategies can have substantial disadvantages.  Depending on the circumstances and alternative used by a debtor, one may be exposed to substantial tax liability or a deficiency judgment.

If you are behind on your mortgage or have received notice that you are currently in foreclosure or pre-foreclosure, the experienced bankruptcy attorneys at the law office of Weston R. Moore may be able to help.  We offer an initial case evaluation so that we can analyze your situation and determine your options.  Weston R. Moore has been helping those in debt protect their homes and their financial future in Kansas and Missouri for over 15 years so call us today at 913-782-7075.

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