Can Bankruptcy Stop Foreclosure?

Hello Hampton Roads,

Can Bankruptcy Stop Foreclosure?

Given that the repercussions of the real estate bubble continue to manifest itself in record numbers of foreclosures, many consumers left with no other options are considering bankruptcy to stop foreclosure.

Side Bar: Rick Sharga, EVP of RealtyTrac estimates there will be an increase to 1 million REOs (foreclosed homes) from as many as 880,000 in 2008.

But which bankruptcy? Chapter 7 or Chapter 13?

Chapter 7 is the most common bankruptcy filing; it is a liquidation where the debtor’s non-exempt property is sold to pay creditors and remaining debts are discharged. Depending on your state law, certain property may be exempt including tools of your trade, and limited equity in a car and home. Chapter 7 does not guarantee you will save your home.

Chapter 13 is also known as "a wage earner's plan"; debtors with regular income develop a plan to pay al or part of their debts over three to five years. Chapter 13 does offer the opportunity to save one's home from foreclosure by allowing one time to cure delinquent loan payments. The benefits of Chapter 13 over Chapter 7 is that it allows one to keep most of his or her property, co-signers may be protected, and creditors don't have to agree to the re-payment plan as long as it is court approved.

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