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Saving your home: Chapter 7 vs. Chapter 13 bankruptcy

Facing the foreclosure of your home can be terrifying. You may feel overwhelmed at the prospect of losing your family home but at a loss for how to challenge the bank or lender from overtaking your house.

Even when the foreclose sale is just days away, you still have options. In some situations, working out an agreement with your mortgage servicer or even filing a lawsuit against the lender may allow you to stay in your home. However, if you find yourself facing insurmountable debt, filing bankruptcy may be the best option to potentially save your home and relieve you of such overwhelming debts.

How filing bankruptcy can halt the foreclosure process

You may fear how bankruptcy will affect your credit in the future. However, bankruptcy can provide a fresh start and an opportunity to save your home in a dismal time.

When you file bankruptcy, an Oregon bankruptcy court will issue an automatic stay. In addition to halting lenders from calling and harassing, this automatic stay also stops a pending foreclosure sale. While this is a temporary fix, it can allow you more time to determine how to keep your home.

Chapter 7 or Chapter 13 bankruptcy?

Chapter 7 is one of the most common forms of bankruptcy. However, in relieving you of repaying much of your debts, your bankruptcy trustee may determine that non-exempt assets, like equity in your home or car, must go to lenders to pay off your debts. While it may be possible to keep your home after discharging much of your other debts, Chapter 7 is often a better option for those without significant assets they wish to preserve.

Instead of wiping out your debts, Chapter 13 bankruptcy allows you to develop a court-approved three- to five-year repayment plan. This plan can allow you more flexibility and by diligently adhering to your new budgeting plan, you can emerge from bankruptcy with your home still in your name. However, Chapter 13 bankruptcy can be challenging for those without sufficient, steady income to repay even a lessened amount of debt.

Deciding both whether to file bankruptcy and which form is right for you depends entirely on your personal situation. When you face foreclosure, seek legal assistance to determine your options to relieve your debts and keep your home.

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Judson M. Carusone, Attorney and Counselor at Law
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Eugene, OR 97401

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