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Power Advocacy Center
Filing Bankruptcy should be the very last step If you want to save your home.
Bankruptcy cases are filed at United States Bankruptcy Courts across the county. The court assigns a trustee to oversee the bankruptcy.
You will either file a Chapter 7 or a Chapter 13 bankruptcy. You can only file for a Chapter 7 if you meet specific income requirements. If these requirements are not met, then you must file a Chapter 13 bankruptcy.
Filing bankruptcy prevents your mortgage lender from foreclosing on your home. Under chapter 13, you can reorganize your debt into a manageable repayment plan, including low monthly payments that allow you to keep your home.
Chapter 13, entitled reorganization, is used when you have some regular source of income and can enter into a repayment plan that will take place over a three- to five-year period. In Chapter 13, you can keep your home and other valuable assets. You do not receive an immediate discharge of debt and will only receive a discharge if payments are made through the repayment plan. During the repayment plan period, you are protected from lawsuits, garnishments, and other creditor actions.
Chapter 7, entitled liquidation, lets the trustee take over your assets, reduce the assets to cash, and make payments to creditors. Depending on your income, you may receive a discharge that allows you to not pay back some of your debt (including mortgage debt). However, the creditor may still pursue foreclosure. Not all debts, though, can be discharged. Child support, criminal restitution, and most student loans cannot be discharged.