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Save Your Home through Bankruptcy

Both Chapter 7 and Chapter 13 stop a foreclosure of your home.  One or the other COULD be better for you.  Which one is it?

Many considerations come into play when deciding whether a Chapter 7 or 13 bankruptcy will be the better path for you.  If we focus only on the factors involved in saving your home, there are advantages and disadvantages to each chapter. Your answer will depend on your unique circumstances.

Let’s assume that after looking at all the other aspects of your financial life, the choice between the two Chapters comes down to how that choice impacts on your home. And let’s also assume that this is a home in distress, where a foreclosure is already scheduled or is just around the corner.

The key difference between Chapter 7 and Chapter 13 is that the first one generally buys you a relatively short time while the second one buys you a much longer time.

So that leaves as the main question whether—in your unique situation—a Chapter 7 would buy you enough time, or if instead you need the much stronger solution of Chapter 13.

Chapter 13 deserves the reputation it has of being the home-saving chapter of bankruptcy.  But every day of the week Chapter 7 bankruptcies are filed which save people’s homes.  If you have a sale pending on your home but you’ve run out of time with a scheduled foreclosure; if you have some money coming to cure the arrearage but again have run out of time; if you are very close to getting a mortgage modification approved or are more likely get it approved after discharging your debts in bankruptcy; or if you’ve decided to surrender the home but need a little more time to get into another home—these are possible circumstances where Chapter 7 could well buy you enough time to do what you need to do.

Admittedly, these are relatively rare situations. The much more common one is that you have lost some income or had emergency expenses, making it impossible to keep up the home mortgage payments. And then you regained that income, but maybe not all of it, and now you owe a whole lot in missed payments, late charges and other fees. No way can you catch up all that in just a few months. Chapter 13 can give you as much as five years to do so.  Chapter 13 can also buy you much more time to sell your home, maybe get to a better selling season, or even maybe allow a kid to finish high school.  Chapter 13 can also be much better at dealing with other home-related debts, such as property taxes, second mortgages, and income tax liens.  As I said, these choices depend on your unique set of circumstances.

You can build a nice gingerbread house out of cookie-cutters. But when it comes to your home, and you and your family’s well being, get the advice of an experienced attorney.  Nothing gives me more satisfaction than helping a family save their home.  Let me help you make the very best choices about yours.

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Robert J. Doig, Attorney at Law
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