Get Out Of Debt

For most homeowners, bankruptcy is certainly not their first choice to save their home from foreclosure. This is for a very good reason, as the credit effects can be quite serious and its results are generally poor, at best. Many of those who file bankruptcy to get out of foreclosure find themselves right back in the foreclosure process within in months of entering bankruptcy. Putting off losing the home is obviously not the reason most homeowners file, as they will then be stuck with both a bankruptcy and a foreclosure on their credit.

Chapter 7 Bankruptcy

In any event, homeowners facing foreclosure can not include the house in a Chapter 7 bankruptcy. Chapter 7 is only for unsecured debt, such as credit cards, store cards, personal loans, and the like. The mortgage is secured by the property, so it would not be dischargeable under Chapter 7. The clause in the mortgage paperwork that keeps it from being included in a Chapter 7 case is that it states the mortgage loan is secured by the underlying collateral, the property itself. Chapter 7 does not discharge secured debt, so this combination excludes the mortgage and this type of bankruptcy from having anything to do with each other.

Chapter 7 bankruptcy may, however, serve a purpose in freeing up income that the homeowners could use to keep on top of their mortgage payment. Keeping a roof on top of their heads is much more important than financing a new television or furniture, and credit card companies who are unwilling to work with homeowners in financial trouble will have to bear the costs of their poor lending decisions. Discharging most of these types of debts can significantly free up income, which can immediately be used to pay down the arrears on the mortgage or establish a repayment plan or other workout program. Homeowners with a debt-to-income ratio too high will not qualify for these bank workout programs, so discharging some of this high-interest, unsecured debt through Chapter 7 may be a reasonable path to getting the mortgage back on track.

Chapter 13 Bankruptcy

Homeowners who want to file bankruptcy to stop foreclosure can include the house in a Chapter 13 filing, which is a reorganization of the debt with a payment plan mandated by the courts. But if the house is already too expensive, then agreeing to an expensive payment plan would not make a whole lot of sense. In Chapter 13, the mortgage payments might very well go up, because the homeowners have to pay the regular monthly mortgage, as well as a portion of the amount that they are in default. Falling behind on this type of bankruptcy almost always results in the house going back into foreclosure and sold at a county sheriff sale.

Especially if the homeowners fall behind on the Chapter 13 plan, they will be in serious danger of losing the home very quickly. Bankruptcy does not actually stop foreclosure — it only puts the process on hold and gives the owners protection under the courts to pay back what they have fallen behind. Thus, if the payments are not made as agreed, the bank will request that the courts lift the stay and allow them to proceed with the foreclosure process. And the lender will be able to proceed as if the bankruptcy never occurred, starting up right from where they left off. This can often result in a sheriff sale being scheduled very quickly, within a matter of weeks.

Filing bankruptcy to stop foreclosure is a decision that homeowners need to consider very carefully, and even potentially consult with a lawyer for approved legal advice. The only real way to get rid of the mortgage and no longer worry about the property is find some way to sell the house, give a deed in lieu of foreclosure, or have it be foreclosed on by the bank. The county sheriff sale will eliminate the mortgage liens and transfer ownership of the property. The homeowners will have to deal with a foreclosure on their credit for 7-10 years, though. There are no easy decisions during the foreclosure process, of course, but the possibility of facing foreclosure and bankruptcy on the same house should be avoided.

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Small irregularities and even ignorance from a borrower can lead to the creation of debts for him. These debts have a lasting effect on the credit history of the borrowers in case there is a requirement in the future. To take care of such debts and combat their effect on future financial dealings, bad debt consolidation is the action which is recommended to all suffering borrowers.

The debts that are created for the borrowers may be due to missed repayments or arrears which are created knowingly or unknowingly. These debts lower the credit score of a borrower and a bad credit history for the borrower is created if the score goes lower than 580 on the FICO scale. Bad debt consolidation helps the borrowers by managing these unpaid debts so that an improvement can be made in the credit standings of the borrower.

Consolidation of bad debts can be done by taking up a loan which equals all the debts combined together. The total amount borrowed will pay off all the unpaid amounts that the borrower owes. Now instead of multiple debts of the borrower, he will now just have to repay only one loan with a single lender. Also, this saves the money of the borrower since the new loan taken up is sought at a lower rate of interest.

The borrowers may take up the money for bad debt consolidation through the secured or the unsecured form depending upon the amount required and also the availability of assets. Also, those borrowers who already have a bad credit history can also take up this process to improve their credit history.

Applying online for obtaining bad debt consolidation will help the borrowers get lower rates for the loan amount. Moreover, professional help can be sought better through the online mode with the wide variety of resources that are available.

Bad debt consolidation removes the burden of debts from the borrowers. They can make use of this chance and improve their credit history easily by removing all pending debts.

If your HOA is trying to force a foreclosure on your condo or townhouse due to unpaid association fees, then it may be likely that they have a lien on the property. This may have been the result of some type of confession of judgment if you ever fell behind or due to the association suing you in civil court. Otherwise there may be some clause somewhere in your HOA paperwork that lets them sue you for a foreclosure if you fall behind on the association dues.

Either way, the HOA is attempting to collect the amount of money they are owed by you for utilizing the services of the HOA (such as they may be). Because you have been unable to pay them for whatever reason, they are now trying to sue you and request that the courts auction off your property to satisfy the unpaid fees. Even if the arrears only amount to a few hundred or thousand dollars, it is quite easy for creditors to force a foreclosure on a large asset such as a property – do not stop worrying just because the HOA fees may be such a small dollar amount.

Bankruptcy, when you file it, stops the collection of any debts you include in the bankruptcy filing until the debts are either discharged or you begin a legal payment plan through the courts. So, the HOA will have to halt any collection efforts if you file Chapter 13 bankruptcy, as long as you include your HOA debt in the petition. You are seeking legal protection from your creditors, and all of them, including the Homeowners Association, must stop trying to collect as long as the issue is in the bankruptcy court.

Thus, the HOA is acting to collect a debt that they are owed by pursuing foreclosure against you. Filing bankruptcy will force them to put their foreclosure process on hold until you work out an arrangement with them. In most cases, you will have to enter a 3-5 year payment plan through the court system to pay back the unpaid fees. If you make it through the plan, then you will have no worries about them foreclosing on the house because you will have paid back any amounts that you were behind. Not being behind means that there is no reason for foreclosure.

But, if you fall behind on the bankruptcy payments, the HOA can have the debt taken out of the filing and have the automatic stay released and begin foreclosure again from the point at which they left off before the bankruptcy. As well, you will be responsible for your regular HOA dues, in addition to the portion you are paying through the court payment plan. Therefore, it is a waste of time, not to mention severely damaging to your credit, to file Chapter 13 if you are unable to afford the regular payment plus a portion what you are behind.

You should probably consult with an attorney or other financial adviser to make sure you are doing everything correctly and work out a budget so you do not fall behind on the payment plan. Although it is possible to file bankruptcy on your own, there are many reasons why it may be a better idea to rely on professional legal advice during such a potentially stressful time. Foreclosure situations, whether they are from the original lender or another party such as the HOA, almost require outside assistance, even if just to make sure you have been as careful as possible and will not have your solution thrown out on a technicality.