Your Car: Keep It Or Sell It
What happens to your vehicle after filing bankruptcy is a matter of your own choosing. If you wish to keep it, you will have to commit to paying the balance to your creditor. If you filed a bankruptcy Chapter 7, you may redeem it by paying the lender a lump sum to cover the propertys value, or you can reaffirm your debt which means that you will continue your monthly payments based on a new agreement with the creditor. However, if you choose this option, avoid defaulting on your payments as lenders can initiate car repossessions under such instances.
On the other hand, Chapter 7 borrowers who feel burdened by the cost of owning a car may opt to give it up. In a bankruptcy petition, you will not be liable to pay your debts anymore. Regardless of the decision, you will need to include a statement of your intention during your bankruptcy case. This is sometimes referred to as a promissory note because you and your attorney will draft your intentions and commitment and negotiate new terms from your lender. Once an agreement has been reached, the document is signed by both parties and filed in bankruptcy court. It will only take effect one a judge enforces the agreement.
The case is different for individuals who are filing bankruptcy under Chapter 13. Since there is no option for redemption or reaffirmation, payments that are behind will be included in your repayment plan.
Other Investments: Protection Or Liquidation
Since there are no exemptions covering investment properties, filing a chapter 7 bankruptcy petition would lead to giving up these properties to be included in your bankruptcy estate. It is highly recommended to give up those with little profit or low return on investment so you wont have to owe your creditors anymore.
On the other hand, since properties are not liquidated in a Chapter 13 filing, you get to keep any personal investment but will still need to pay off any debts incurred. However, note that if you have a lot of investments, there is a higher chance that the amount you will have to repay under the new payment plan will increase. To avoid ballooning of payments, you may opt for a mortgage cramdown which essentially reduces the value of a secured debt owed
Mortgage cramdown is another option if you file for Chapter 13 bankruptcy and is only applicable to property that is not your residence. Cramdowns enable a borrower to decrease the debts principal balance equivalent to the amount of the property by which it is secured.
Asset Cases Property Is Sold
If you do have non-exempt assets, these will be sold to satisfy part of your debt to your creditors. This property may be sold at auction to a third party. In some cases, you can also use your exempt finances to pay the cash value of important property, keeping it in the family after the bankruptcy is final. Then, whatever money is collected is divided among your creditors.
Sometimes, the trustee will have questions about your exemptions that require investigation or additional documentation. For example, the trustee may need to determine the current market value of your primary home to see if it falls within the exemption limits. In these cases, the trustee will report that information to the court and keep your case open until those questions are resolved.
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Can I Afford To File A Chapter 7 Bankruptcy Case After Foreclosure
You may be unsure how you would file a bankruptcy case after foreclosure. It took the rest of the money you had to find a place to live and move out of your home. How are you supposed to pay for a Chapter 7 attorney?
Upsolve can help. Our no-cost bankruptcy program assists low-income individuals who cannot afford an attorney to file a Chapter 7 bankruptcy case to get out of debt. We do not require you to pay for our bankruptcy services because we are a non-profit company.
If you are still unsure, you can use our simple Chapter 7 Bankruptcy screener to determine if Upsolve and Chapter 7 is a good fit for you. Answering just 10 simple questions can help you decide if filing a Chapter 7 bankruptcy case is right for you.
What Happens After The Case
There is a chance you can keep your home after bankruptcy, but this isn’t always the case. If you don’t have the income to continue paying your mortgage after bankruptcy, you may need to let go of your home.
So why file bankruptcy instead of just accepting the foreclosure?
The main difference between the two is what happens after the sale of the property. In a foreclosure, there is a possibility that you will still owe money to the creditor after the sale if the proceeds of the sale don’t cover the debt. In a bankruptcy, however, all debts will be discharged after the case is closed.
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Q5 If My House Is Seized When Do I Move Out
When the trustee decides to sell your home, you will have a few weeks to find alternative arrangements and move out. You dont have to worry about immediate eviction. Sometimes, the trustee can allow you to stay until your house is sold.
Even when the trustee decided not to sell your house, and youre facing foreclosure, youd lose your home eventually.
When you file bankruptcy, the automatic stay will be in place. That means your lender should stop collecting from you and the foreclosure process ceases temporarily.
If you decide to surrender your house, you may still have 30 to 60 days before you must move out. Thats because the lender needs to file a motion to lift the automatic stay and follow the proper foreclosure process that will take that much time.
Sometimes, lenders dont resume the foreclosure process until after the court has released your written debt discharge. That happens four to six months after you file bankruptcy.
What To Do If Child Support Agreement No Longer Serves Non Custodial Parent
If the child support agreement no longer serves the non-custodial parent, the parent should seek a child custody modification in court. A parent should be prepared to discuss the reasons to support a modification. However, a court may still decide not to alter the agreement, if the court deems the agreement to be working. Was this page helpful?
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Home Foreclosure After Chapter 13 Bankruptcy
Home » Home Foreclosure after Chapter 13 Bankruptcy
Sometimes a debtor files a Chapter 13 bankruptcy. Then, meets all the payment requirements for Chapter 13. However, at the end of Chapter 13, they still get hit with mortgage foreclosure. Why? The lender might claim they are thousands of dollars behind because of the accrual of late fees during the bankruptcy. Or, it might be that property taxes and insurance were not paid.
Often debtors fail to put language into their plan that prevents foreclosure at the end of the case. How could someone file for bankruptcy and still face foreclosure?
If You Are Only Filing Bankruptcy To Avoid A Deficiency
If the only reason you are filing for bankruptcy is to avoid a mortgage deficiency balance, you could be jumping the gun by filing before your foreclosure sale because you may not be liable for a deficiency anyway.
What is a deficiency? A deficiency is the difference between how much you owe at the time your home is sold at foreclosure, and its fair market value. For example, if you owe $350,000 on your first mortgage and your home sells for $300,000, the deficiency is $50,000. In many states, the mortgage lender can sue you to collect this amount.
Bankruptcy wipes out your personal liability for a mortgage deficiency no matter when you file. But even without bankruptcy, you still might be able to avoid liability for a deficiency. There are a number of situations where borrowers who are foreclosed on do not owe a deficiency:
- State laws. Some states do not allow a mortgage lender to sue former homeowners for a deficiency, at least for certain types of loans.
- Waiver of deficiency. Many lenders will waive a deficiency in certain situations, especially if you apply for a short sale, deed in lieu of foreclosure, or you have an attorney fighting the foreclosure.
- No collection attempts. And many lenders, even if they obtain a deficiency judgment, won’t try to collect it.
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Keeping Your Home In Chapter 13 Bankruptcy
The good news about filing for Chapter 13 bankruptcy is that its designed to allow you to keep your house. With Chapter 13, you, the bank and your creditors all decide on a repayment plan that takes three to five years, but your assets are not sold off. Once the plan is completed, your unsecured debt is discharged. The trick, of course, is making it to the end.
The plan that is worked out with the court and your creditors will include a way to catch up on and pay your mortgage if you can afford it.
Under a Chapter 13 repayment plan, if youre behind on your mortgage the plan will work out how you pay the past due payments over the three to five years, but you also must make the current monthly payments.
What Happens On The Day Of The Sheriffs Sale
On the day of the sheriffs sale:
- The bank takes title to the house and the redemption period begins
- The redemption period is made to protect borrowers from abuses by lenders and usually lasts for 6 months
- During the redemption period the borrower can live in and occupy the property, but doesnt have to pay the mortgage or property taxes.
- During this period the borrower may also buy back the house for the price paid at auction, but this is difficult because lenders wont lend to people right after a foreclosure
- After the redemption period has ended, the borrower can be evicted, and must find somewhere else to live
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Bankruptcy Foreclosure Short Sale And Your Credit Score
If you want to buy a home despite a bankruptcy or foreclosure on your record, you’ll need to clean up your finances. The single most important step is repairing your . Your credit score is your financial lifeblood, a tool that you wield to get a mortgage loan approval. You cannot get a mortgage without a credit score and credit history that proves to lenders that you can be counted on to repay the loan.
As you plot your strategy, first assess the damage to your credit score. That depends on a number of factors, including your credit history before your trouble with homeownership. If you had a high score before the foreclosure, bankruptcy or other negative event, your credit score probably dropped further than those whose scores were always lower. According to FICO, creator of the FICO credit score, a foreclosure or similar event could derail your credit score by 100 points or more.
The damage to your credit score also depends on the type of home loan woes you suffered. According to FICO, a bankruptcy is on average more damaging to your credit score than a foreclosure, short sale or deed in lieu of foreclosure. A short sale or deed in lieu of foreclosure can be just as damaging to your score as a foreclosure credit reports don’t generally differentiate between these types of foreclosure alternatives.
Can The Lender Collect The Deficiency
Whether your lender can come after you for the deficiency depends on the state you live in. Some states, including California, bar lenders from going after borrowers for a deficiency if the underlying mortgage was secured by the borrower’s principal residence. In most nonjudicial foreclosure states and a few judicial foreclosure states , lenders have the right to recover a deficiency only if they file a separate lawsuit against the borrower. Because of the expense , lenders frequently forego this right.
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What Happens To Your Credit Score After Filing Bankruptcy
Chapter 7 bankruptcy and Chapter 13 bankruptcy filings show up on your credit report. How long it shows up depends on which type of bankruptcy you file. Chapter 7 bankruptcy stays on your credit report for 10 years after the filing date. A completed Chapter 13 bankruptcy stays on your credit report for 7 years after the filing date, or 10 years if the case was not completed to discharge.
As a result, filing bankruptcy will initially lower your credit score. How much your credit score will drop depends on how high or low it was before bankruptcy. Generally, a decrease between 100 to 200 points can be expected.
The good news is that you can begin rebuilding your credit as soon as your bankruptcy discharge is entered. It’s possible to have a better score within 1â2 years of filing. The credit scores of most bankruptcy filers are already lower because of missed payments. After the court grants a discharge, most unsecured debts are erased. Credit scores improve because there are no more missed payments and discharged accounts show a zero balance.
After Chapter 7 and Chapter 13 bankruptcy is filed, you will get credit card offers in the mail. These offers can be for secured credit cards, sometimes called prepaid cards, which require a cash deposit. Or, offers can be for unsecured credit cards, but will likely have high interest rates or annual fees.
Which Is Worse A Foreclosure Or A Bankruptcy
Note that the bankruptcy credit impact is the same, whether you file for Chapter 7 or Chapter 13. In addition to the actual score decrease, the time period of a foreclosure credit penalty may be less than a bankruptcy, depending on which Chapter youre petitioning to receive. A foreclosure is removed from your credit report after 7 years.
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How Bankruptcy Will Affect Your Credit
Although bankruptcy and foreclosure are both damaging to your credit, sometimes filing bankruptcy can be a wise choice when trying to rebuild credit.
A foreclosure not only damages your credit score for years, but you are still left with the mortgage debt. Most mortgage creditors will not consider you for future mortgages if you have a foreclosure on your credit history.
In contrast, bankruptcy lets you start fresh. It still damages your credit, but because you are debt-free, you begin rebuilding good credit sooner.
Although bankruptcy has a few negative consequences, and may not save you from losing your home, it can be the best option in starting fresh with no debt, getting back on your feet, and saving money.
Avoid The ‘credit Repair’ Temptation
There is no quick fix to improve your FICO credit score. No matter what a credit repair company might claim, the negative information including a foreclosure or bankruptcy on your credit report stays on your report for a set amount of time.
What to Do
Avoid two common scams. The first scam is a promise to wipe negative information from your report prematurely. If your goal is to buy a home after a short sale, foreclosure or bankruptcy, taking the longer, disciplined route means staying away from too-good-to-be-true offers.
Second, beware claims you can boost your credit score by linking an unrelated individual’s good credit to yours. FICO views the practice of linking to an unrelated person’s score called “piggybacking” as manipulation. Its latest FICO scoring model eliminates a credit score benefit by piggybacking on someone unrelated to you. Piggybacking services are costly and will ultimately prove to be of little benefit to getting a home loan after bankruptcy or foreclosure, so you’re better off avoiding it.
Fixing your credit is an essential step in getting a home loan after a bankruptcy, foreclosure or short sale. The sooner you start working on improving your score, the closer you’ll get to homeownership. However, it’s only a single step on your road to recovery if you want to make homeownership a reality again.
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Different Ways To File For Bankruptcy
Bankruptcy is a process in which the court decides what the best route is for a person with overwhelming debt to pay as much as possible, given their assets. The solution may be Chapter 7, which discharges debts but also liquidates assets though not all of a persons assets. Chapter 13 bankruptcy allows a person to keep their assets, but puts them on a strict repayment plan.
No matter which type you file for, the court puts an automatic stay on any foreclosure action. This means that if your house was being foreclosed on, that procedure will stop as the court sorts out your ability to pay. It doesnt mean, however, you automatically keep your house.
In both types of bankruptcy, there is a homestead exemption, a way to protect some of the equity you have built. Its another element of bankruptcy designed to make it more possible to keep your house. Each type of bankruptcy is a totally different process, but in each, the idea behind exemptions is that the person needs to protect some important assets in order to get by. There are also exemptions for keeping your car and other necessary items. The amounts vary by state, but the types of things you can exempt are limited to what you need to get by. Luxury items are not on the list.
You are required to have lived in a state, in that house, for 40 months, in general, to claim a state exemption. Check with your state rules to see what the details are.
Allowed Late Fees In Chapter 13 Foreclosure
Do you know that some mortgage companies attempt to charge late fees for every month that the debtor is in Chapter 13 bankruptcy? However, this is only allowable if the judge dismisses the case. But, it is not allowable after a discharge.
The only allowable charges from mortgage companies are in the events of dismissal of Chapter 13, it is withdrawn, or converted to Chapter 7. However, they are cannot charge penalties if the debtor completes their Chapter 13 plan. If a mortgage company charges fees to a debtor after the discharge, the debtor can seek a reversal of the chargesoften with the ability to recover attorney fees.
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