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Should I File Chapter 7 or Chapter 13 to Stop Foreclosure?
Which bankruptcy should I file? Chapter 7 is quick and easy, but Chapter 13 allows repayment of missed mortgage payments. Whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, the “automatic stay” goes into immediate effect. The automatic stay prevents your creditors from taking any steps to try to collect money from you. Both Chapter 7 and Chapter 13 will stop foreclosure. But there are major differences between Chapter 7 and Chapter 13 when it comes to real estate. Every case is different. I get asked on a weekly basis: Should I File Chapter 7 or Chapter 13 to Stop Foreclosure?
File Chapter 7 to Stop Foreclosure
If you want to stop foreclosure, but you do not want to keep your home, file a Chapter 7 bankruptcy. Stopping a foreclosure with Chapter 7 gains you some breathing room and allows you the time to move to another place. In these cases, you are not “stopping” the foreclosure, but simply delaying it.
Chapter 7 can temporarily stop foreclosure, but you must get current on your mortgage if you want to keep the property. Otherwise, the foreclosure will eventually continue. After falling behind on your mortgage, a Chapter 7 bankruptcy filing will signal to the lender that you are accepting the foreclosure but may need time to move. If you cannot afford the monthly mortgage payments, even with a modification, then Chapter 7 is a good choice for you.
File Chapter 13 to Stop Foreclosure
Chapter 13 bankruptcy takes 3-5 years to complete, so it much more complicated than a Chapter 7. However Chapter 13 allows you to pay missed mortgage payments, late fees, and escrow advances over an extended repayment plan. To complete a Chapter 13 Plan, you will need at least enough income to meet both the monthly mortgage payments (and condo or homeowner association payments) plus some money each month toward the missed payments.
In other words, Chapter 13 bankruptcy allows you to reorganize your mortgage debt and repay missed payments over a period as long as 60 months. Chapter 13 can also, on the other hand, simply buy you some time to figure out what you want to do with the property. You may be able either to find a buyer and sell the property or obtain a mortgage modification.
Chapter 13 may also help you eliminate the payments on your second or third mortgage. If your mortgage is greater than the value of your home, Chapter 13 allows you to strip away junior liens. Any second or third mortgages or home equity lines of credit will be recategorized as unsecured debts.
IMPORTANT: If you have fallen behind on your mortgage payments, act now before your lender adds thousands of dollars of legal fees and costs to your bill by initiating a foreclosure.
So Should I Chapter 7 or Chapter 13 to Stop Foreclosure?
You want to stop a foreclosure. Only the automatic stay of a bankruptcy filing will stop the foreclosure auction. Should you file Chapter 7 bankruptcy or Chapter 13 bankruptcy? The answer depends on your intentions toward the property and your larger financial goals. If you are ready to let the property go, then in most cases, Chapter 7 bankruptcy is your best bet. If you want to keep the property, or buy some time to explore other options (like modifying your mortgage or selling the property), then Chapter 13 is probably a better option. Either way, you should seek the advice of an experienced bankruptcy lawyer to help you weigh your options.
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Brian Lee from Lee Legal was an amazing attorney to work with. He took his time, reviewed my documents and we discussed my situation thoroughly. He explained the process and my options as well as gave his recommendation. Not only did he assist, but he ensured that I knew this...
I was very nervous and scared about going through this process. But Brian was very knowledgeable and helped me through it. I was notified about any and all updates to my case and he was very responsive when I had questions regarding any concerns I had. Although a bit nerve...
Brian provided me with a very detailed analysis about my potential case after our first consultation. He promptly responded to all my complex questions, especially navigating student loans and some tax discussions. He is very professional and experienced at what he does, I would...
I've had the pleasure of working alongside Brian V. Lee for several years, and I can say without hesitation that he is one of the most knowledgeable bankruptcy attorneys in the DMV area. Brian's command of Chapter 7, 11, and 13 practice is exceptional, and his clients in the DC...
Brian has the amazing talent of taking complicated legal matters and distilling them down to seamless, frictionless resolutions. He is a phenomenal problem solver and a trusted advisor.
Brian is both warm and professional. He helped me navigate a financial issue that I had not been looking forward to working on and he made the entire experience non-stressful, receiving a lot of anxiety I had around the matter. He is straight forward and a fantastic problem...
I had the opportunity to work with Brian at a time when I was challenged by a professional setback and forced with the challenge of making some very difficult legal decisions. Additionally, I worked with him again as I was dealing with some financial issues pertaining to my...
Still several years from Public Service Student Loan Forgiveness and saddled with significant student loan payments in proportion to my income, I came to Lee Legal to explore the bankruptcy path. Through his counsel, Brian took the fear out of the process and helped me to...
