Q: How can bankruptcy help people who are in foreclosure?
A: Many people have homes that are currently in foreclosure. While bankruptcy is not something that every person in foreclosure should end up filing, the vast majority of people in foreclosure should at least consider bankruptcy as an option. There are advantages to filing both chapters depending on individual circumstances. Some people are in homes that are upside down and have no equity. People in those situations might not want to save their home. However, they may want to stay in the home as long as possible.
Filing a Chapter 7 bankruptcy may be the best option to choose as immediately upon filing, the bankruptcy creates a freeze (called an automatic stay) which stops the creditors from continuing their foreclosure efforts. Many debtors wait until their house’s sale date to file their bankruptcy, which can substantially extend their time in the house. Other debtors might have already lost their homes and Chapter 7 provides them with the closure they need to get the foreclosure off their credit and any deficiency debt discharged as well.
Some debtors want to keep their homes, but they are significantly behind in their mortgage payments. People in that situation might be best served by filing a Chapter 13. A Chapter 13 reorganizes the debt of the debtor and like a Chapter 7, the creditors are stopped from collecting immediately upon filing. The debtor then comes up with a repayment plan to catch up on the late payments, as well as make their new mortgage payments in a timely manner. In addition, the bankruptcy court offers a Bankruptcy Mediation Modification Program, which has a high success rate and allows a much more streamlined modification process than the one that people attempt outside of bankruptcy. Chapter 13 is known as the chapter of bankruptcy where people save their homes and it can be very effective.
Q: Can bankruptcy help with vehicle repossessions?
A: Vehicle repossessions are a common reason for filing bankruptcy. Many people fall behind in their car payments and lose their car as a result. To make matters worse, the creditor auctions the repossessed vehicle off for a significantly lower price than the actual value of the vehicle and then pursues a deficiency judgment against the debtor for the remaining balance owed after auction. Many people, who could not afford their car payments to begin with, now face having to owe money on a car they don’t even own anymore.
Chapter 7 bankruptcy can eliminate that debt and help the debtor recover. If bankruptcy is not filed in that situation, the creditors can end up getting a judgment against the debtor and will start trying to collect their money by garnishing wages or seizing bank accounts. Seeking bankruptcy prior to the lawsuit process will be much easier for the debtor than the stress that will ensue upon being served.
Chapter 13 is also an option for the debtor who is behind in their car payments. However, they should probably consult with an attorney prior to making that choice strictly based on their vehicle as they could end up in bankruptcy for awhile. The filing will freeze the creditors before they are able to seize the car and the debtor could propose a repayment plan that if accepted by the court and not objected to by the creditor, could save the vehicle and be a good solution for all parties involved. Chapter 13 can also, in certain situations, lower the balance owed or interest rate on the vehicle.
Q: How can a bankruptcy help with wage garnishment?
A: Many debtors who owe money end up getting sued by their creditors. These creditors then end up with judgments that they will attempt to collect on. The primary way the creditors collect is by garnishing the wages of the debtor. The creditor can garnish their wages through the court and the employer of the debtor will be ordered to take out a certain percentage of the debtor’s paycheck and distribute that money to the creditors. This process will continue until the debt is paid off or the debtor leaves that specific place of employment.
Having your wages garnished can be a backbreaking experience as any slight change in income received can negatively affect the debtor’s chance of being able to afford their monthly expenses. In these situations, the best option might be to file a bankruptcy. If the chapter of bankruptcy filed is a 7, the wage garnishing will stop immediately upon filing and that debt owed should be discharged.
While the wage garnishing will also cease in a Chapter 13, the debt will not be discharged and some of the debt might have to be paid as part of the debtor’s repayment plan. There are not many options outside of bankruptcy that can stop a wage garnishment. Most people having their wages garnished are not in a position to settle debts owed. As a result, it would be smart to consider bankruptcy in those situations so no more monthly income is wasted on an old debt.