Chapter 7 Vs. 13 And Foreclosure
1. What is the difference between a chapter 7 and chapter 13,
2. how do these affect a homeowner in foreclosure, and
3. how do these impact a purchase agreement already in place for the property?
1. Chapter 7 is for liquidation. You give all your assets that are not exempt to a trustee and he/she will sell them. You home is exempt most of the time and you will be allowed to keep it if you can afford the payments. Chapter 13 sets up a plan where you can get caught up by making long term payments on your past due bills. You may give back some property or keep it and pay for it. If you have equity in assets that are not exempt you will have to make payments on the equity as well.
2. Both will place an automatic stay against foreclosure. 13 will allow you to keep homestead longer if the plan is workable and there is some equity in the property. In a 7 if you want to keep homestead you will have to work out a plan with the lender separate after the first few months or bring it current to give it back.
3. If you already have a property sold you will have to file a motion and ask for the courts approval before you can sell. In both plans you will need court approval to buy or sell real property and you can not borrow without court approval and most of the time that is hard to get . PM me if I can explain some of this further.
Good LUCK and Thank You
Hope this helps some
Ted Jr
The best advice is, AVOID AT ALL COSTS!! There are alternatives to BK, and Foreclosure. I would explore them berfore commiting to those alternatives. If you must file BK, then do so if that is the only alternative you have left. I did this as a last resort and I am going to feel the re-percussions for quite some time. I did a Chapter 7, but I had nothing to liquidate, so I came out ok with my house and a vehicle. I got rid of everything else..mostly CC debt that was out of control from late fees and service charges. Besides my credit being scared for a while, I will recover from this. Once you do this, there are ways to begin rebuilding your credit right after the proceedings are over and discharged.
Good luck
I'm not sure of the specifics of all the homestead exemptions, but if the house is in foreclosure at the time of the Chapter 7, it is also possible to get the court appointed trustee to release their interest in the property if you can show them that they will not be able to get money through the sale.
If they have little to no equity but a fat 2nd, then you can do this to get a short sale opportunity. Also, since they are in BK, this can help with your proposal to the bank since they know the owner really is in trouble and they may not be able to get much of any money.