Filing bankruptcy is not a conclusion people come to lightly. There are several different variables that come into play. One of the biggest is your mortgage. Unfortunately there are times when we just can't get out of the hole our bills are digging. When this occurs there is a possibility you don't have any other choice. So how the mortgage is affected by bankruptcy seems to be the number one concern.
There are two choices when filing bankruptcy; Chapter 13 or Chapter 7. In order to do this properly you need to file it with the federal bankruptcy court and pay all the fees involved.
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Those who have a stable income can always opt for something called; the wage earners plan. It's basically a Chapter 13 bankruptcy with a repayment plan for the home. It allows you to pay off the debts based on your future income, which will span over a 3 to 5 year period. Once all payments are made you are given a discharge for your debts.
This is a great way for both you and your creditors to work together. It gives you the opportunity to repay your payments and be able to negotiate a new payment schedule to lower your payments. Keep in mind; your payment period is going to get extended. In most cases this is by a few years. Oh, and you could also get a lower interest rate.
Chapter 7 bankruptcies are more straight forward. This is where all your assets are liquidated. Some of them may be exempt, so the job-related tools and furniture in the home won't be taken. Once everything is liquidated you will receive a discharge. However, beforehand your court appointed officer will either sell the other items or give them to the creditors.
Those who are willing to file re-affirmation paperwork will be able to keep their home, even if filing a Chapter 7 bankruptcy. The goal behind it is to tell the courts you claim responsibility again to make payments on the loan. If you're able to keep up with your payments the mortgage company will definitely be willing to work with you. Unless of course you decide not to file the paperwork then you're pretty much on your own. In this case they will demand repayment if you fall behind again, or simply take the home.
Keeping up with your repayments is the key. When you file a Chapter 13 it can help save your home and hundreds of dollars a month. Individuals filing a Chapter 7 usually don't have a source of income to repay the debt. You can file more than one, but they can only occur once every six years.
One of the first questions people ask is how the mortgage is affected when filing bankruptcy. It's a great question considering the complexity of the laws, but only an attorney would be able to answer it. The best thing to do is consult a professional before jumping into a bankruptcy. These should only be used as last resorts to save your home.
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