Posted on December 04, 2017 in Chapter 13

Chapter 13 can work much better than Chapter 7 if you have a second mortgage, get behind on property taxes, or have a tax lien on your home.

The last two blog posts were about situations in which a homeowner is current on the mortgage but has other debts on the home. We showed how Chapter 7 “straight bankruptcy” can work well enough in the 6 debt situations we covered.

But Chapter 7 is often not the best option when you have a lien on your home. Chapter 13 comes with better tools for dealing with such debts against your home. Even if you’re current on the mortgage itself, these tools may make Chapter 13 highly worthwhile for you.

We’ll show how Chapter 13 helps in the same 6 debt situations covered in the last two blog posts about Chapter 7. We’ll cover the first 3 today and the other 3 in a couple days.

Here are the first 3 debt situations:

1. Second or third mortgage

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 Posted on December 01, 2017 in Bankruptcy

Here are 3 more scenarios for when you are current on your mortgage, where Chapter 7 works well in dealing with other home-related debts.

Our last blog post was about situations in which Chapter 7 works well enough in the following 3 debt situations:

1. Second or third mortgages
2. Property taxes
3. Income tax with a lien recorded on your home

In general, if you are current on your first mortgage but have any of these 3 debts, sometimes Chapter 13 helps much more than Chapter 7. But last time we showed scenarios when you don’t need the extra time and expense of Chapter 13.

We do the same today with the following 3 other home-related types of debts:

1. Judgment with a lien attached to your home

2. Homeowner association debt with a lien

3. Child/spousal support unpaid with a lien

Judgment Liens

In bankruptcy you can often remove a lien on your home arising from a creditor’s judgment against you. That’s important because otherwise the lien would continue on your home’s title even after you discharge (legally write off) the underlying debt.

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 Posted on November 29, 2017 in Bankruptcy Options

There are scenarios when you are current on your home mortgage and are dealing with other home-related debts where Chapter 7 works well.

You’re current on your home mortgage payment, although you’ve been struggling mightily to keep it that way. You’re thinking very seriously about getting some financial help through bankruptcy. But you absolutely want to keep the home that you’ve fought so hard to keep current.

You’re trying to decide between Chapter 7 and Chapter 13, and are about to see a bankruptcy lawyer. So far you see some advantage in one or the other, or maybe in both. Maybe Chapter 7 is attractive because it seems easier and quicker. Or maybe Chapter 13 looks better because it handles certain of your special debts better. Either way you want to make sure you can keep paying your mortgage so you can keep your home.

How does this work in Chapter 7 and Chapter 13? Today we’ll start with Chapter 7, and get to Chapter 13 later.

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 Posted on November 27, 2017 in Mortgage

Here are 6 ways filing a Chapter 7 case can help you deal with your home lender and related debts, and 6 ways filing a Chapter 13 one can.

If you’re buying a home your mortgage and other home-related debts are probably your most important ones. That’s especially true if you want to keep the home. So the choice between filing a Chapter 7 “straight bankruptcy” and a Chapter 13 “adjustment of debts” often turns on how each would handle these kinds of debts. We’ll get into more detail about these in upcoming blog posts, but here’s an introductory list.

Chapter 7

1. Maintain current mortgage payments: If you want to keep your home and are current on your mortgage, just continue making the payments. Doing so should become much easier since you’re likely discharging (legally writing off) all or most other debts.
2. Forbearance agreement: If you are no more than a few months behind on your mortgage, enter into a “forbearance agreement” with your mortgage lender. You agree to pay an extra amount each month to catch up on the mortgage. This assumes that your bankruptcy filing frees up enough money each month so that you can catch up fast enough

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 Posted on November 24, 2017 in Bankruptcy Options

Very broadly speaking Chapter 7 handles simple debts as well or better than Chapter 13 does, which handles more difficult debts better.

Debts in Bankruptcy

When deciding between Chapter 7 “straight bankruptcy” and Chapter 13 “adjustment of debts” you look at many factors. You have to meet certain qualifications (usually easy to meet) to file either one. The amount of your income, the nature of your assets, whether you own a business, and your immediate and long-term goals—all of these come into play.

But the most important consideration is your debts. Bankruptcy is of course mostly a tool for dealing with your debts. Chapter 7 and Chapter 13 each deal better than the other with certain types and combinations of debts.

Today we get into which of these two consumer bankruptcy options is better for which debt scenarios.

A Helpful Starting Point

Our first sentence gives us a good starting point. Chapter 7 handles simple debts as well or better than Chapter 13 does, which handles more difficult debts better.

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 Posted on November 22, 2017 in Automatic Stay

Filing a Chapter 7 or 13 case both stop creditor collection actions against you just the same. But after that the differences are huge.

Last time we focused on how you can use the Chapter 7 and Chapter 13 options to your time advantage. Chapter 7 “straight bankruptcy” is very fast. If all or most of your debts can be discharged (written off), that quickness can be an important advantage. But its speed can be a downside. If you are behind on a secured debt, Chapter 13’s 3-to-5-year-long duration can be a crucial advantage. It not only buys you time but gives your protection and flexibility for dealing with such special debts.

So, both bankruptcy options provide protection, but of different kinds. Let’s see how these work to see which would be better for you.

The Immediate Protection

With either kind of bankruptcy you get immediate relief from almost all creditor collection actions.

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 Posted on November 20, 2017 in Bankruptcy Options

Chapter 7’s big advantage is that it’s quick. Chapter 13’s big advantage is that it buys you more time to do what you want or need to do.

A Key Distinction-Treatment of Time

We’re starting a series of blog posts about the practical differences between Chapter 7 and Chapter 13 bankruptcy. Before getting down into the details let’s look at a difference that affects just about everything else—time. These two options deal with time very differently.

Sometimes getting something done quickly is to your advantage. Sometimes getting more time to get something done is to your advantage. Here’s how these play out with Chapter 7 and 13.

Chapter 7—In and Out Fast

If you’re like most people thinking about bankruptcy, you’ve been hurting financially for a long time. Understandably you want to get a fresh financial start fast.

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 Posted on November 17, 2017 in Bankruptcy Options

Here’s an example why to keep an open mind about filing under Chapter 7 vs. Chapter 13. Slightly different facts can make all the difference.

Last time we introduced some of the main differences between Chapter 7 and Chapter 13. We suggested that you learn about them but also keep an open mind when you go see a bankruptcy lawyer. At that meeting you will always hear about advantages and disadvantages of each option you didn’t know about. Often you hear for the first time about certain tools that can really help you. So you may end up going a different route than you expected.

Here are two versions of an example that illustrates this well.

An Example Using Chapter 7

Assume the following. Three months after losing a job you get another one at a somewhat lower salary than before. Over the years before you’d accrued $50,000 in credit card debt and medical bills on which you’d started falling behind. While you weren’t working you fell even further behind and one medical collector has just sued you. You’re now also 2 months behind on your $1,500 monthly home mortgage payments ($3,000). For personal and financial reasons you really want to keep your home.

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 Posted on November 15, 2017 in Bankruptcy Options

Chapter 7 takes about 4 months, while Chapter 13 takes 3 to 5 years, and likely costs more. But that doesn’t begin to answer which is better.

Chapter 7 and Chapter 13

Chapter 7 “straight bankruptcy” is usually, but not always, for simpler situations. It’s often the right choice if your income is relatively low, your assets are modest, and your debts are straightforward. You keep all of your assets, all or most of your debts are discharged (legally written off), and if you want you keep paying on your vehicle and/or your mortgage or rent.

Chapter 13 “adjustment of debts” is usually, but not always, better for somewhat more complicated situations. Your income may be too high to qualify for Chapter 7. You may have an asset or two that is not “exempt”—not protected. Or you may have debts much better handled under Chapter 13. Do you owe income taxes or student loans or a second mortgage? Are you behind on a vehicle loan, home mortgage, property tax, or child or spousal support? These and certain other kinds of debts are often handled much better in a Chapter 13 case.

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 Posted on November 13, 2017 in Bankruptcy

Filing a Chapter 7 case stops foreclosure of your home temporarily, helping you gather funds for your transition to your next housing.

Recently we went through a list of ways Chapter 7 buys you time when dealing with debts affecting your home. Included was that filing a Chapter 7 case can “stop a lawsuit from turning into a judgment lien.” That judgment lien could turn a debt that you wouldn’t have to pay after bankruptcy into one you would. That’s certainly a result you want to avoid.

Some judgment liens against your home can be “avoided”—or undone-- in bankruptcy. Then maybe you wouldn’t have to pay the underlying debt. But some judgment liens can’t be “avoided.” The debt behind such a lien would therefore have to be paid, even after filing bankruptcy. Again, that’s a result you really want to avoid.

In those situations filing a Chapter 7 case before there’s a judgment usually prevents that bad result. Let’s dig into this more to better understand it.

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