Homeowner’s Guide to Bankruptcy – Avoid Foreclosure

In many cases, yes, you can get out of debt and stay in your home. However, most people who file for bankruptcy are unable to pay off their debts and often are able to retain some or all of their assets. Under Chapter 7 of the US Bankruptcy Code, borrowers are permitted to claim several different exemptions for certain types of property.

There are several different laws that apply to your home and you must carefully review the terms of your loan agreement to determine if this is the best course of action. For example, the first exemption allows you to claim your home as your principal residence for up to ten years. The second will allow you to avoid paying the full mortgage amount on your home for five years, and the last one allows you to use your home as your “liquid asset”.

Once your home has been placed under liquidation, you must pay back any amount of the outstanding balance on your home loans, mortgages, credit cards, and other similar financing arrangements. You also may not take part in any type of financial activity, such as credit card usage, that involves the payment of interest.

To avoid the problems that may result from a bankruptcy proceeding, it is advisable that you consult with an attorney experienced in the Bankruptcy process to determine whether it would be in your best interest to file. Your bankruptcy attorney will help you determine which debts are exempt, how much is actually owed, and what types of exemptions you are entitled to.

If you do choose to pursue legal action against creditors, the court will determine the amount that you owe and will notify your creditors of this determination. In some cases, your creditors may accept a settlement offer if they feel you have been over-indulgent in spending. If you are able to settle your debts, you may be able to obtain lower interest rates on your loans or reduced monthly payments.

Even if you choose to pursue the option of bankruptcy, remember to consider all of your options before making this drastic step. For example, bankruptcy does not always mean the end of everything. There may still be other options that are available for you to avoid declaring bankruptcy.

Foreclosure is not the only option. You may choose to refinance your home to keep it from falling into foreclosure, or you may find a buyer who is willing to buy your home at a lower price. If your credit has become poor, there are lenders who can refinance you and sell you a second home at a discount.

In all cases, you must consider the consequences of filing for bankruptcy. Your home may be in jeopardy, and you may lose your assets, which can include retirement funds and medical benefits, in order to satisfy your debt. Any decision to file for bankruptcy must be weighed carefully and realistically.

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