If You Can’t Save Your Home From Foreclosure: Prepare For A Bright Future Using A Chapter 7 Bankruptcy.
You may have entered the foreclosure process with the mindset of wanting to save your home, but you discovered that you can’t save your home from foreclosure. Try this strategy – benefit from the lengthy process of foreclosure: prepare for a bright future.
Sometimes saving your home from foreclosure is just not the most realistic path to take, we know how hard it can be. Loan modifications are difficult. Not everyone qualifies for them, and many struggle working with their bank to get approved for one. Often times, you get denied time after time.
And, a chapter 13 bankruptcy is often used to save homes from foreclosure, but they are very hard to manage and require you to make huge monthly payments for 60 months to try and pay back missed mortgage payments. Depending on your situation, it can be a leap to try and make one work for you.
So, as hard as it may be to overcome, you’ve determined that saving your home is not a good strategy for you. You’ve come very far and made a huge decision. Now that you know you will be moving in the near future, you are wondering how you will get back on your feet again after the sheriff sale.
A Chapter 7 Bankruptcy Can Help You Get Back On Your Feet Again
There are two points in time when a Chapter 7 Bankruptcy can be helpful to you if you’ve determined that you can’t, or don’t want to save your home from foreclosure.
Scenario 1: There is no impending sheriff sale, and you are fairly early on in the foreclosure process.
You are going through the foreclosure process and have done a lot of your research, or maybe spoke to a foreclosure lawyer about your options for saving your home, but decided that saving your home is not in your cards.
Filing a chapter 7 eliminates all of your personal obligations to pay any and all debts. This then allows you to start rebuilding your credit right away since you do not have any debts.
At the same time, since the foreclosure process is just getting started, you can live rent-free for months before a sheriff sale can be scheduled which means you can save money that you would otherwise use to pay your mortgage or rent.
It is even possible to rebuild your credit from what may be 580 or 590, to 680 or 690 within 12 months. This score is good enough to buy a car at the best rate. After 24 months, you can be as high as 750. If you put the $2000 a month you might be paying rent with in the bank for 12 months you would have $24,000 and after 24 months, $48,000 and coupled with a 750 credit score, you could be in pretty good shape after 12 or 24 months.
Using the very lengthy amount of time that it takes to foreclose on a home to your advantage, you can eliminate all of your debts now, live rent-free during that time, rebuild your credit, and even save some money for the future.
Scenario 2: You have an upcoming sheriff sale.
If it is just inevitable for whatever reason that your house will be sold at a sheriff sale, you can delay the sale by up to 120 days by getting a 30 day adjournment from the sheriff’s office and then filing for a chapter 7 bankruptcy. With his additional time, you can better prepare for moving and also enjoy the other benefits of chapter 7 bankruptcy.
Assuming you postponed the sale by 30 days with a 30 day adjournment, (Read More About That Here), filing a chapter 7 will delay the sale by another 90 days and will discharge all of your debts.
Further, it can also help you avoid enormous tax liabilities. Here’s how:
If you don’t file for a chapter 7 bankruptcy, the bank has the right to seek to recover the difference between what the house is sold for and the amount that is owed, this is known as a deficiency amount. However, what is more common is the deficiency amount is forgiven by the lender and it is then required to be reported to the IRS as income in a 1099 statement and you may have to pay tax on that amount. A chapter 7 bankruptcy protects you against both of these very negative possibilities.
For example, if there is a deficiency amount of $100,000, you could owe up to $50,000 in income tax and you didn’t even get the money! Chapter 7 bankruptcy avoids this issue, provided it is filed BEFORE the sheriff sale. And of course, you get the added benefit of up to another 90 days in the house since the chapter 7 delays the sale by up to 90 days.
A chapter 7 bankruptcy before the sheriff sale will eliminate your debts and buy you extra time in your home so you are well-positioned for the future.