If you are facing repossession of your home, car, or other property, you may have an option for stopping the proceedings: bankruptcy. To learn how each type of bankruptcy can stop foreclosure or repossession proceedings, read on.
Chapter 13 Bankruptcy
Chapter 13 is a way for bankruptcy filers with a steady income to repay a portion of their debts over several years. When a bankruptcy petition is filed, it triggers the automatic stay, which prevents all creditors from taking any action to collect on debts. This includes property repossession and foreclosure proceedings. While the bankruptcy is in process, your property will be safe. A Chapter 13 payment plan will make arrangements for you to catch up on past payments on your home or car and continue to make those payments, eliminating the need for foreclosure or repossession.
Chapter 7 Bankruptcy
Like Chapter 13, Chapter 7 contains the automatic stay provision that stops collection during the bankruptcy process. Unlike Chapter 13, however, Chapter 7 bankruptcy serves as a way to liquidate valuable personal property in order to pay debts like medical bills and personal loans, which will be discharged. Debts tied to property, like cars and homes, are usually also discharged, meaning that the filer is released from responsibility for paying them; in return, the filer must forfeit these items of property. In some cases, a filer may opt to speak to his lender regarding reaffirming these loans and continuing to pay them, allowing him to keep the property. Now that other debts have been discharged, he may have the income to make payments on property that was once scheduled for repossession or foreclosure.
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