BANKRUPTCY AS A FINAL OPTION
HOW BANKRUPTCY WORKS
It takes about about 110 days for a foreclosure to occur after the Notice of Default is recorded. Usually it takes at least 6 months or more for a lender to complete a foreclosure. While your house is in foreclosure, your payments keep accruing with interest and penalties. Additionally, there are to be additional foreclosure and trustees fees and costs. If you want to keep your home, filing a bankruptcy can help you in several ways. First, a Chapter 7 petition would allow you to discharge any unsecured debts and possibly allow you to make up or cure the arrearage in a short amount of time while the Chapter 7 case is open. That’s not usually practical because if you’re having financial trouble its going to be a reach to come up with that amount of cash in a short amount of time.
Chapter 13, however, allows you to make up the delinquent payments over time, usually 3-5 years. This works if you have regular income and can afford to make the ongoing payments plus whatever amount it would take to cure the deficiency over time. In some circumstances, Chapter 13 may also allow you to “strip off” a totally unsecured junior lien on your house. For example, if your house was now worth $200,000; it had a 1st Note and Deed of Trust in the amount of 210,000.00 and a second in the amount of $100,000, you could get rid of the 2nd deed of trust in its entirety, because there is no equity to protect its interest. [Note: A new bill has been introduced in Congress that may allow you to strip off a lien in a Chapter 7. President Elect Obama has previously indicated that he would sign such a bill.]
For more information on how Bankruptcy works, visit: www.sactobankruptcy.com
