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DOES BANKRUPTCY PREVENT FORECLOSURE?

By Jeffrey A. Cancilla, Esq., The Law Offices of Jeffrey A. Cancilla

The Law Offices of Jeffrey A. Cancilla are dedicated to preventing foreclosure without bankruptcy, whenever possible. However, when necessary, the filing of a bankruptcy is a vital tool to immediately pause a foreclosure, giving the homeowner breathing room to work out a repayment plan on the mortgage. The following article is a very brief comment on selected aspects of Chapter 13 bankruptcy as it relates to foreclosure prevention. Whether you should file bankruptcy, and whether you should file under Chapter 7 or 13, depends upon your financial circumstances and what your objectives are. We would be glad to consult with you free of charge should you have any questions about your particular case.*

Statistics have shown that approximately half of all bankruptcy debtors own a home at the time they file for court protection.  Statistics also show that 80% of the Chapter 13 cases are not completed.  While the threat of losing the family home is a key motivating factor in the decision to file for bankruptcy court protection, we do not recommend rushing to file unless there is no other viable alternative, as Chapter 13 should be used as your emergency back-up plan, rather than a first line of defense for foreclosure.  In our cases, a Chapter 13 Bankruptcy is chosen when all other effort to "mitigate" the potential foreclosure have been exhausted, or when a foreclosure sale date is looming,  The automatic "stay" (pausing of foreclosure and other collection proceedings) is entered as soon as a Chapter 13 bankruptcy petition is filed with the court. 

WHAT EXACTLY IS A CHAPTER 13 BANKRUPTCY?

Chapter 13 bankruptcy is a repayment plan filed by individuals who wish to save a valuable asset; usually a home. During the plan, the debtor keeps current payments current, and also makes monthly payments toward past due balances. Debts are prioritized, and secured creditors get paid first. Remaining disposable income goes to pay unsecured creditors, in a hierarchy established by the Bankruptcy Code. If all payments have been made as scheduled, unsecured debt remaining at the end of the plan may be discharged.   This means it is possible to obtain some benefits of the classic Chapter 7 "fresh start" bankruptcy within the Chapter 13 while also saving your home!   Since the plan will require regular monthly or bi-weekly payments, Chapter 13 is usually only appropriate for an individual debtor who has a regular source of income.

WHO MIGHT BENEFIT FROM CHAPTER 13?

People with:
  1. Mortgages, car payments, or other secured loans they would like to bring current, so they don't lose the property associated with those loans.
  2. People with taxes, child support, student loans or criminal or fraud-related judgments that can't be wiped out by Chapter 7 bankruptcy.

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This article does not constitute legal advice, and no attorney-client relationship exists with the Law Offices of Jeffrey A. Cancilla until a written agreement is signed by both parties. Jeffrey A. Cancilla also involved in Foreclosure Education Center training programs for attorneys nationwide to concentrate on pre-bankruptcy strategies to "tune up" a client's mortgage default prior to any court filing, so that any remaining debt may be more affordably handled if a Chapter 13 is indeed necessary. To reach Jeffrey A. Cancilla, you may call Toll Free 800-844-1513.



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