Understanding Bankruptcy: A Temporary Solution for Homeowners Facing Foreclosure

Is Bankruptcy a Good Way to Avoid Foreclosure?

Many people think that bankruptcy is a good way to avoid foreclosure. However, this isn’t really true. A bankruptcy actually doesn’t forgive mortgage debt. There are two common bankruptcies used by homeowners.

Most homeowners file bankruptcy through Chapter 7 or Chapter 13.

Chapter 7: The Clean Slate Approach

Think of this like a fresh start. You sell your assets to pay back what you owe. But you still have to make your mortgage payments.

Chapter 13: The Payment Plan Approach

This is like a payment plan. They will combine your debts and create a 3-5 year strict repayment plan. If you miss even a single payment, it can lead to a lot of headaches! On top of that you are still responsible for covering your mortgage payment. They may put this into one payment for you. But this payment is more than your previous mortgage payment. This is because it is restructuring your debt.

Why Bankruptcy Is Not a Long-Term Foreclosure Solution

Using bankruptcy to delay foreclosure is smart because it acts as a temporary hold rather than a permanent solution.

We use it as a strategy when time isn’t on our side to get your full-fledged solution worked out. But… we do not charge you the typical $2500 to file the bankruptcy, nor do we recommend actually going through the bankruptcy process. We usually only recommend using bankruptcy as a way to buy more time. Bankruptcy rarely makes sense as a real solution. It's really just kicking the can down the road.

What’s Next?

You find yourself lost on how to select the next step. Want to learn long term options for avoiding foreclosure you might have?

Book a time to discuss your options.