Filing for Bankruptcy to Avoid Foreclosure, Part Two

Earlier this week, we talked about the growing trend of filing for Chapter 13 bankruptcy protection in order to halt Georgia’s fast foreclosure process. Under Chapter 13, a filer’s unsecured debts, such as credit cards, are generally waived, while a three- to five-year plan to pay off mortgages and other secured debts is created, which must be approved by a bankruptcy court. However, there are still restrictions and potential consequences: if a debtor misses a payment under the plan, he may still lose his home.

However, many Georgia residents are resorting to Chapter 13 as a way of halting the speedy foreclosure process and keeping their home, at least in the short-term. In Georgia and throughout the United States, a Chapter 13 bankruptcy filing will create an automatic court-ordered injunction to halt a foreclosure, regardless of the circumstances.

Even if the bankruptcy does not ultimately go through, the filer now has more time to sort out the situation. But homeowners need to remember that it does not mean they are protected from foreclosure forever, says Georgia State University law professor Jack Williams. “It’s like a time out. Like a game of freeze tag,” he said. “You’re safe, but only for a period of time.”

Georgia bankruptcy attorneys agree, stating that homeowners need to assess all of their realities and discuss their options with a debt counselor or bankruptcy attorney before making the decision to file for Chapter 13 bankruptcy. “If you’re upside down on the mortgage, the first question to ask yourself is: Is it worth it to stay in the property?” said attorney Michael Rethinger. “I see plenty of people trying to hold onto homes that aren’t worth it.”

Source: Atlanta Journal-Constitution, “Bankruptcy as a means of halting foreclosure, for a moment”, Katie Leslie, 18 January 2011