Many homeowners have been hit by the harsh reality of depressed economic times, by facing a pending home foreclosure. If you are one of these unfortunate homeowners, filing bankruptcy can delay a foreclosure, or possibly even save your home.
This is not a measure to be taken lightly as bankruptcy can seriously damage your credit standing. But, if you are faced with the ominous choice between damaging your credit report and losing your family home, you may find saving your home to be the more preferred option. Here’s how filing bankruptcy delay foreclosure, or possibly stop it altogether.
Bankruptcy
The quickest way to put a halt to foreclosure is to file for bankruptcy. When you file for bankruptcy the court will order an automatic stay
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Chapter 13 Bankruptcy vs. Chapter 7 Bankruptcy
A chapter 13 is the best choice between the two bankruptcy options. The most appealing part of a chapter 13 bankruptcy ruling will be that you will have a period of time to repay your outstanding debts, all of them including your mortgage. With a chapter 13 bankruptcy plan you can avoid foreclosure, stay in your home, while you begin to repay the delinquent money on your mortgage.
Frequently some of the debts that have been a burden on you financially will be removed altogether allowing you to free up funds to put towards your home payments. If you adhere to the restrictions in a chapter 13 bankruptcy you cannot only begin to repair your credit issues, but also save your home from foreclosure.
While chapter 13 is the best option if you hope to keep your home, chapter 7 is a good way to delay the process. Many of the benefits of a chapter 13 bankruptcy are not part of a chapter 7 order, but they can give you time to build up a financial reserve to allow you to rent a place to live. Chapter 7 will also dissolve your original mortgage when the process is final. If you choose to file chapter 7, you may still lose your home to foreclosure, but you will be able to buy yourself some time to find an affordable place to
Another reason for Enron’s bankruptcy was the unnecessary personal spending by corporate managers. It was a direct loss to the company’s shareholders. In the later stages before its bankruptcy, the luxuries were paid from the company’s borrowing, as it had no real profits. Therefore in the later stages, the creditors were at a loss rather than its shareholders.
The credit crisis is referred to as economic downturn by credit squeeze, provision of doubtful debt and bankruptcies among others. (IMF, 1998) Credit crisis is known as a credit crunch, it is an extension of recession. According to the Ocaya (2012), Credit crisis is a sudden shortage of loan and tightened the requirement of economy and society needs of getting loan from financial institutions. In such situation, lender started keeps the cash and stop lending money because they are worry about a large of debtor bankrupt and mortgage defaults. Lender had adjusted the interest rate of borrowing to unaffordable rate. Credit crisis decrease the total demand and fall in supply, therefore, it constrains the growth of the economy. The credit crisis is begun in the early 2006 when several events relating the financial system went wrong in the United States of America. The factors leads to credit crises are complex with varying weight.
The Bankruptcy Code can be found under Title 11 of the United States Code (U.S.C.); this code is then divided into chapters 1, 3, and 5 which provide provisions concerning bankruptcy case and debtors. These chapters are then applied to six specific types of bankruptcy relief classified as Chapters 7, 9, 11, 12, 13, and 15. For businesses companies they mainly file for Chapters 7, 11, 12, and 13. Even though bankruptcy is a federal law, state laws can apply its own ba...
Market crashes are not a new phenomenon but the most disturbing fact about the financial crisis of 2008, was that it was self-inflicted. What started as a credit crunch during the early 2006, turned into a fully-blown recession by mid-2008.The world’s financial system received a huge shock in September 2008, with the collapse of The Lehman Brothers, one of the biggest global investment banks [3]. The Global Financial Crisis of 2008, was undoubtedly the worst economic slump since the Great Depression of 1930. While the bankers and financers hold the responsibility for the global economic turmoil, the business schools have also, being partially responsible, faced criticism.
Empirical research suggests that the bankruptcy procedure in itself dramatically favors equity holders over creditors, particularly during a reorganization process. Additional legislation may be needed to ensure both fairness and economically efficient outcomes. Much of this is also due to disparate incentives, both natural and those inherent in bankruptcy process itself, among relevant parties along the APR scale. The costs of Chapter 11 versus Chapter 7 have been historically been mixed, although there is robust empirical evidence showing that, when self-selection is accounted for, Chapter 11 firms are less costly and more adept at retaining firm value.
America is in fear over the financial crisis, and no clear solution has presented itself.
Over the years, the process of declaring bankruptcy has become incredibly simple. Because of this change, the number of people declaring bankruptcy is at an all time high. Today, bankruptcy is a common thing among companies and individuals alike. The American bankruptcy law allows people to avoid paying their debts by offering the debtors a discharge without a harsh consequence. By not having repercussions for their actions, bankruptcy filers often plan future bankruptcies, allowing them to steal even more money from creditors with no punishment. There are 13 different chapters in the bankruptcy system with the principal chapters being 7,11, and 13. You can only file for bankruptcy under these three chapters, the others are there to explain how the system works. Under Chapter 7, a person’s debts are wiped away while under chapters 11 and 13, debts are frozen while the debtor figures out a way to repay them. The people filing Chapter 7 are stealing money from creditors who are trying to help them. It is one’s moral duty to pay back his debts and one should be disgraced and embarrassed if they borrowed money they cannot pay back. Over 1,400,000 people filed for bankruptcy in 1998 under Chapter 7, Chapter 11, and Chapter 13. 75% of them were under Chapter 7, leaving “retailers, bankers, and credit-card companies” with $40 billion in unpaid debts (Kopecki 5) (Pomykala 16). The use of different reforms could cut down on the number of Chapter 7 filings and put responsibility back on the debtor. Declaring Chapter 7 bankruptcy is ethically and morally wrong and through different reforms this current “right” would be considered a crime.
Doesn't Chapter 7 wipe out all your debts? If you could pay them back, why wouldn't you do so instead of declaring bankruptcy? It's true that Chapter 13 bankruptcy requires you to pay back some or all of your debt. But Chapter 13 offers advantages that may fit you best.
Chapter 7 bankruptcy can wipe out most of ones debts but certainly not all of them. Certain kinds of debt are not covered by the terms of Chapter 7. Some examples of debts that must be paid after filing for bankruptcy would include child support, alimony, income taxes and penalties, student loans, and court ordered damages due to unfair and unrightous acts. Bankruptcy courts handle your financial problems until the case ends. A court assumes control of all ones debts that are owed and all property that is not exempted. A person, trustee, is appointed to be in charge of your debt. The trustee collects property that can be taken and sells it to repay some creditors. That property can be surrendered to the trustee, one may pay the market value of it or one also may choose to trade exempt property with nonexempt property. A small number of people actually lose property when filing bankruptcy. If a person changes their mind about filing for bankruptcy they may ask the court to dismiss the case. At the end of the process the court would discharge most of the debts and one is unable to file for Chapter 7 bankruptcy again for at least another six years.
“One out of every two hundred homes will be foreclosed every month, making 205,000 new families enter into foreclosure,” Mortgage Bankers Association. The housing industry in the United States is undergoing an unfortunate crisis. There are way too many homes being foreclosed, which cause a ripple of problems.
A personal bankruptcy is a legal proceeding involving an individual who no longer has financial means to pay outstanding, non-business debts. There are two main types of personal bankruptcy: Chapter 7 and Chapter 13. To qualify for a Chapter 7 bankruptcy, the debtor must pass a means test which judges whether his income is adequate to support his family and payback debts. If the means test is passed, debtor makes a petition of his assets and liabilities, which is presented to a district court. Chapter 7 is a straight bankruptcy, meaning most debts are forgiven and the value of the debtor’s liquid assets are used to repay some of the debt.
Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
The bankruptcy court declares a person bankrupt, takes his or her assets, and distributes them among the creditors.
The question to ask is can you really afford it? With the help of a financial adviser and a real estate agent, you will be in a position to find home options that are within your financial capabilities. You can work with a budget range to find the best home for you. Condition
Foreclosure is an extremely serious topic for so many people. For some, it simply means that there are cheap houses on the marker, for others, it is the end of their lives as they know it. Ultimately, there really isn’t a solution to foreclosure, but there I have formulated a plan to help slow down the process.