Bankruptcy Definition
Before assuming that bankruptcy is the only solution to your homeownership woes, you should always be aware of its rights and responsibilities. Consequently, you will be better equipped to maximize its benefits and deal with its consequences.
In the first place, bankruptcy is a legal procedure in which an individual or organization files a petition for the declaration of bankruptcy or insolvency, primarily to protect both the debtor and the creditors, although in different ways. All of the debtor's assets are assessed and used to repay a portion of the outstanding debt.
In the case of a householder who faces imminent foreclosure, court-filed bankruptcy can halt the banks' efforts to recover their property. This is known as an automatic stay, which will be discussed in greater detail later.
You can petition for either of these two types of personal bankruptcy as an individual:
- Chapter 13 bankruptcy affords you the chance to make up on past-due payments.
- Chapter 7 bankruptcy provides the aforementioned stay, thereby preventing the creditor from taking immediate action to recover the subject property.
Insolvency's Automatic Stay
Therefore, which of the two is more effective in preventing a foreclosure? It is always advisable to consult a legal professional, such as a lawyer, for advice on the matter, as the answer depends on the specifics of your situation.
In general, however, both types of bankruptcy filings will automatically place a temporary hold on the foreclosure proceedings. We must emphasize, however, that the bank will eventually be able to take the necessary measures to recover the foreclosed property. It is only a matter of time and the ruling of the judge presiding over the case. If you want to retain your home, Chapter 13 bankruptcy is preferable to Chapter 7 bankruptcy if you want to keep your home.
What advantages can be obtained by staying? By filing for bankruptcy, you are protected from the following:
- Lawsuits, whether commencing or ongoing
- Collection calls of any kind, notably those from overzealous dent collectors that border on harassment
- Repossessions
- Foreclosure transactions, which may have been your primary objective to begin with.
- Garnishments against your earnings
However, you should not assume that the automatic stay will prevent the bank from recovering the subject property indefinitely. The judge may lift the stay upon the creditor's request or upon your discharge.
You must then take all other measures possible to stop the foreclosure, especially considering that bankruptcy is a black mark on your credit report. This red mark will remain on your credit report for the next seven to ten years, making it extremely difficult for you to obtain a new mortgage or even a decent apartment.
" - https://www.affordablecebu.com/
