Filing for Bankruptcy to Avoid Foreclosure, Part One
When considering bankruptcy, it is important to know the various options and what each might mean for your specific situation. While Chapter 11 bankruptcy is reserved for business bankruptcies, Chapter 7 and Chapter 13 are intended for individuals who can no longer pay their bills and debts. With Chapter 7 bankruptcy, a filer forfeits their real estate and personal property such as cars to a bankruptcy trustee, who will sell it to repay creditors. To compare, a Chapter 13 bankruptcy involves the creation of a three-to five-year plan to pay back secured debts (such as mortgages) while writing off credit card and other unsecured debts.
For homeowners who wish to remain in their home, Chapter 13 is usually a better option, as it allows a filer to maintain ownership of assets such as homes and vehicles. Recently, many Georgia homeowners have begun to take advantage of the guarantees of Chapter 13 bankruptcy in order to stave off foreclosure and to keep their homes.
In Georgia, foreclosures happen at lightning speed. A foreclosed home is often sold on the courthouse steps mere weeks after the homeowner learns of the foreclosure, leaving them with little time and even fewer options. In order to buy themselves more time and to potentially keep their home, homeowners are now commonly resorting to Chapter 13 bankruptcy to place a short-term halt on the foreclosure process as they assess their options.
According to Doug Erickson of consumer credit counseling service CredAbility, approximately 20 percent of the clients he sees cite foreclosure as the primary reason for their bankruptcy filing. “The problem we find is that people wait too long to get help. They don’t come to us when they are two or three months behind, but they come when they are six months behind or there is a foreclosure sale scheduled in two weeks,” he said. “Because of that, bankruptcy is the most immediate answer, the most immediate cure. However, it’s not necessarily the best cure.”
We will continue our discussion of this topic later this week.
Source: Atlanta Journal-Constitution, “Bankruptcy as a means of halting foreclosure, for a moment”, Katie Leslie, 18 January 2011