As most of you know I am not an attorney therefore I do not give legal advice. Yet, as I come across more and more homeowners who are underwater, that is to say, they owe more on their home than what it is worth, many of them tell me they are thinking about filing bankruptcy and want my opinion.
For some individuals, filing for bankruptcy relief can provide a way out of debt and a fresh financial start. But whether or not a bankruptcy filing is in your best interest depends on many factors and your individual circumstances, therefore an attorney should be consulted. A good bankruptcy attorney in the Raleigh-Durham- Chapel Hill area, is Travis Sasser (919-319-7400).
Based upon my former career as a financial planner, I always found it a good idea to tell my clients to evaluate all options before deciding to file for bankruptcy. Think about the types of debt you have and the goals you want to achieve by filing for bankruptcy.
A bankruptcy discharge doesn’t eliminate certain types of debt. This means that filing for bankruptcy may not be in your best interest if all you want to do is wipe out debts that can’t be discharged in bankruptcy.
Another consideration: do you need to file for a Chapter 7 or Chapter 13? Do you know the difference between the two? There are several reasons why Chapter 7 (start over) might be better for you than Chapter 13 (reorganize).
Chapter 7 is usually quicker than Chapter 13, and most debtors can keep all or most of their property, and Chapter 7 filers don’t have to pay back a portion of their debts, like you do in Chapter 13. But you might not qualify for Chapter 7 bankruptcy. Check with an attorney that specializes in bankruptcy.
A typical Chapter 7 bankruptcy case is opened and closed within three to six months, and the person filing emerges debt-free except for a mortgage, car payments, and certain other types of debts, such as student loans, recent taxes, and unpaid child support.
As I said, not everyone is eligible to use Chapter 7 bankruptcy. If your income is sufficient to fund a Chapter 13 repayment plan, after subtracting what you’ll spend on certain allowed expenses and monthly payments for child support, tax debts, secured debts (such as a mortgage or car loan), and a few other types of debts, you won’t be allowed to file for Chapter 7 bankruptcy
And if you use Chapter 13 bankruptcy, you must complete the entire three- to five-year repayment plan in order to have your remaining debts discharged (unless the court lets you off the hook early, for hardship reasons). The majority of those who file for Chapter 13 bankruptcy don’t complete their plans, so filers run a very real risk that their debts won’t ultimately be discharged.
If you have any debts that are secured by your property such as a mortgage or car loan, your lender can foreclose on or repossess your property if you default on your obligation. Bankruptcy procedures can be very complicated. You should seek the advice of a competent lawyer before you attempt any filing. Yes. I said competent, as some lawyers are not competent.
Whether you are underwater or above water, if you think you might want to discuss an auction or traditional listing, or if you have some questions about this article, give me a call at 252-257-4822.