One of the best uses for bankruptcy is to prevent a home foreclosure. A Chapter 13 Bankruptcy allows you to catch up on mortgage arrears while paying your regular monthly mortgage payment directly. This is one of the main problems people have with their mortgage companies. After falling a couple months behind due to illness or an unexpected event, mortgage companies will not work out a way to catch up, resulting in foreclosure. Chapter 13 bankruptcy stops this.
Chapter 13 bankruptcy creates a repayment plan where mortgage arrears are repaid without late fees or interest over a 3 to 5 year period. At the end of which, the mortgage is completely caught up and the debtor has built up some equity. A Chapter 13 bankruptcy will also discharge many other debts as a bonus.
This is the type of help that many people need. We all suffer life events that hit our finances. Sometimes, we can work our way out before bad things happen, but not always. A Chapter 13 bankruptcy gives the time needed. It allows mortgages to be caught up, back taxes paid off, and vehicles saved from repossession, all the while, discharging other debts, like credit cards, medical bills, pay day loans, etc., so that you have more money at the end of the month.
Losing a Home in Bankruptcy
Many people are afraid that filing bankruptcy means losing your home. Generally speaking, you will not lose your home in Chapter 7 bankruptcy or Chapter 13 bankruptcy. The Bankruptcy Code, and state laws, try to protect homes in bankruptcy because it is better for the debtor, and the economy as a whole, if people stay in their homes.
The reason a creditor would want a home sold in bankruptcy is to sell it for its equity and distribute it to the creditors. Equity is the cash received after a house is sold and all expenses are paid, including the full mortgages and liens, realtor costs, and taxes. In most states, including in Wisconsin, the Bankruptcy Code and state laws allow a significant amount of equity before a Bankruptcy Judge would even contemplate allowing a home sold.
Even in the rare circumstance where there is too much equity to protect, this only prevents filing a Chapter 7 bankruptcy. This is not a bar to a Chapter 13 bankruptcy. When there is too much equity for Chapter 7 bankruptcy, Chapter 13 allows the excess equity to be paid to your creditors over a 3 to 5 year repayment plan instead of selling the home. Moreover, the amount to be paid back is capped by the amount of other debts. In practice, this means that this scenario almost never happens, and if it does, the prepayment is not very much over a number of years. And this is the worst case scenario.
In the end, the nightmare scenario that stops many people who really should be filing bankruptcy from talking to a bankruptcy attorney is rare or non-existent. Plus a qualified bankruptcy attorney will be able to tell before filing if the equity in a home is a problem. Fear of losing a home in bankruptcy should never stop anyone from filing a bankruptcy, if it is needed.
Bankruptcy should be seen as a tool by homeowners, not feared. Many, many people use Chapter 13 Bankruptcy to get their homes out of foreclosure and build up equity. Also, very, very few people lose their homes in bankruptcy. If you think you need a bankruptcy, do not let your home stop you.
Contact the qualified bankruptcy attorneys at Croke and Croke today to get your options. Located on Milwaukee's south side, including Bay View, St. Francis, Cudahy, South Milwaukee, Oak Creek, and Northern Racine County, and more.