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How Bankruptcy helps the homeowner during Tough Times

Bankruptcy is a tool, which can be employed to help the homeowner during tough times such as a recession or personal hardships. By enacting this tool, you are increasing your argument as a responsible person for help when appearing before a bankruptcy appointee making a final judgment concerning your case.

While banks can begin repossession measures, a limited amount of time exists to prevent foreclosure if you file for bankruptcy only as a last alternative. In some cases, foreclosure can be prevented if an agreement can be reached between the homeowner and the lender. At that point, you may be able to make new arrangements such as selling the deed to another leader or asking for forbearance.

Usually it takes between two to four months before a lender will begin foreclosure. If you know that you are getting into trouble, it would be wise to speak to a bankruptcy attorney to avoid allowing this problem to become bigger. Whatever your decision, communication with either a lawyer or a lender is vital.

The two common types of bankruptcy protection are rulings filed under Chapter 13 and Chapter 7 as identified by the U. S. Federal Bankruptcy code. Any one of these filings will result in the U. S. Bankruptcy court’s ordering an immediate Stay. This simply means all legal actions begun by the lender must stop pending the outcome of the court’s final decision.

However, a lender can request that this “Stay” be lifted if there is probable cause for the court to lift this protection. If this does happen, the amount of time a homeowner is given to file bankruptcy is greatly reduce to less than four months. Therefore, it would be wise for the homeowner to not delay filing when made aware their lenders also have certain legal tools to prevent the homeowner from fighting back.

The time to make this important decision is limited. Sadly, once an order of foreclosure takes effect, bankruptcy protection is no longer effective.

While it is true that Chapter 13 does allow a homeowner to catch up on past due bills, there is a big drawback. In order to file, you must have access to a larger than normal amount of income in order to become current with your lender and with the bankruptcy court administering your case. But a Chapter 13 filing reduces the worry of carrying a second or third mortgage as these are often transferred to a new status, unsecured loans. This simply means that these loans might not have to be repaid if there is nothing to secure the value of the balance once the court has approved a repayment plan you have submitted.

While homeowners can take the more severe decision to file Chapter 7, there are pros and cons to this type of filing. It does affect your credit rating for a period of time between seven to ten years. But, you are freed from having to repay any loan amounts during the time the house in question is either entered into a new mortgage or you are able to find a new home.

If you do find that you are in serious jeopardy of losing your home, do not delay taking important steps to prevent consequences which will become “very real”. Bankruptcy is the best protection and your most powerful tool against tough times.