Chapter 7 Vs. 13 And Foreclosure
I already got some responses in the foreclosure forum, just want to double-check. Working with a seller that was in foreclosure, have an agreement, now she has filed Ch. 13. She is paying all the late fees, etc. She still wants to sell to me - later - then, she says, she will file Ch. 7. I'm trying to understand the bankruptcy situation.
1. What is the difference between a chapter 7 and chapter 13,
2. how do these affect a homeowner in foreclosure,
3. why should someone file 13, then 7, and
4. how do these impact a purchase agreement already in place for the property?
1. Chapter 7 is a complete wiping out of debts aside from student loans, tax debts, and certain medical bills (unsure of the last). The trustee examines the person assets to determine if any could be liquidated to pay off days; usually not the case in bk7. After the hearing discharge in granted within a 30-90 day period, all applicable debts are discharged, and person cannot file for another full six years from that date. Most choose to do away with their home, if approaching foreclosure banks are first in line to collect before other debtors.
Ch. 13 I like to call a reorganzation where you pay off some percentage of your total debt minus interest and fees over a 24 month period. Last payment will be the dischage date. Foreclosures can be settled in this scenario.
3. One can file a bk7 and the very next day file a bk13 right behind it. Or you can file bk13 in a back to back scenario. One might enter a bk13 and come in a position not to be able to pay off the debts or acquired additional debts that cannot be paid and seek out a discharge on those debts.
Bk7 requires a full six year wait to file another bk7 from date of discharge or dismisal.
[ Edited by sbc on Date 01/28/2004 ]
Doesn't matter which she files, just keep watching that RE and you will see it in foreclosure again soon....a BK, whether 7 or 13, merely stalls the foreclosure, and certainly doesn't kill it.
This is very common stall technique, and it's always followed by the creditor's motion to lift the BK "Stay" within a few weeks after the BK's filed, and then the court lifts the stay, and the FC proceeds.
olivetree,
Purchase and sale agreements yet to close, which were executed prior to the bankruptcy filing ,are "executory contracts" and are voidable (not void) by the bankruptcy trustee.
Martin