Filing for bankruptcy has a very real stigma and some significant downsides, including the potential for losing as much as 240 points from your credit score and the persistence of the filing on your credit report for as long as a decade. But for those who are facing the very real possibility of losing their homes to foreclosure, filing for personal bankruptcy can represent a very real-life preserver.
If you’re on the receiving end of persistent collection calls from debt collectors, filing for bankruptcy automatically brings those calls to a stop. Not only can this bring tremendous psychic relief, but for those whose financial situation has gotten so bad that foreclosure proceedings have already begun, the mere act of filing for bankruptcy has the nearly magical impact of bringing all of these activities to an immediate stop as well. In most cases, foreclosure proceedings don’t begin until the homeowner has already missed several payments. If you’ve already worked to have your loan modified and had no luck, bankruptcy may be your best option. With collection efforts from all parties stopped, those who have simply fallen behind in payments but who have income may be able to accumulate and save enough money to begin making payments on their mortgages again, especially without the added pressure of having to pay other creditors like credit card companies. If you do have income, you may then move to file for Chapter 13 and working out a payment plan that will help you to get your finances back under control. If you opt for this type of bankruptcy filing, you have a very good chance of retaining possession of your home.
If your financial situation does not provide enough income to consider reorganizing your debts, Chapter 7 is probably a better option. Though it results in the majority of your assets being liquidated, it also has the advantage of eliminating all secured debt. This means that if your home’s value has fallen below your mortgage amount and you have added on a second mortgage or home equity line of credit, those additional unsecured debts may be eliminated entirely by the bankruptcy court.
If you need information on how filing for bankruptcy can help you, we can help. Contact us today to learn the advantages and disadvantages, the steps involved, and what other options may exist.
