Will
Bankruptcy allow me to save my house from foreclosure?
If you have fallen behind on your house payments, Chapter 13 may be a good choice to prevent a bank foreclosure. Chapter 13 can stop all foreclosure proceedings by giving you a chance to catch up on the late payments over a 3 to 5 year period of time. The late payments, also known as the arrearage, will be allocated into equal monthly payments. For example, let’s say your late payments total $6,000.00 and your Chapter 13 plan runs for the full 5 years. There are 60 months in 5 years, so that means you would pay $100.00 per month for 60 months or 5 years after which time the full $6,000.00 ($100.00 x 60 payments) would be paid in full. There are other costs associated with a Chapter 13, which would increase your monthly payment, but in this example $100.00 per month will be used to catch up on your house note. Of course, you will also be required to make your usual mortgage payment in addition to the Chapter 13 payment. As long as you pay the regular mortgage payment along with your Chapter 13 payment the bank will be legally prohibited from foreclosing on your home.
Chapter 7 will have a very different impact on an attempt to foreclose your home. Although the filing of Chapter 7 may delay the foreclosure process, it will not prevent the loss of your home, if you are behind on your payments. In the event that you are just not able to afford your mortgage payment, plus the amount required to catch up on your payments within the 5 years permitted under a Chapter 13, then the loss of your home to foreclosure may be inevitable. A foreclosure, however, does not necessarily erase the money debt owed to the bank. In that case a successful Chapter 7 will eliminate all money owed on the mortgage, so that after taking your home the bank is not ever allowed to collect money from you on this loan.
Also, many people do not realize that a foreclosure can sometime create tax problems for the home owner. When the bank does not recover the full amount owed on the loan they may “forgive” the remaining debt and take a tax write-off instead. Under IRS regulations that “forgiveness of debt” actually becomes income to the home owner, who just lost their home to foreclosure. That income is taxable to the homeowner, the same as if they received a paycheck for the same amount. Of course, that means the homeowner not only lost their house, but then owes taxes to the IRS as a result. In many cases filing a Chapter 7 will avoid the tax, as the debt is discharged in bankruptcy instead of being “forgiven” by the bank.
When facing the loss of your home to foreclosure, consult the lawyers at Heller & Richmond, Ltd. to learn how bankruptcy may either save your home or save you from the further financial hardships that may come with the loss of your home. Know your rights and protect your future.
Phone: 312-781-6700 or E-Mail: MRichmond@Hellerrichmond.com
If you have fallen behind on your house payments, Chapter 13 may be a good choice to prevent a bank foreclosure. Chapter 13 can stop all foreclosure proceedings by giving you a chance to catch up on the late payments over a 3 to 5 year period of time. The late payments, also known as the arrearage, will be allocated into equal monthly payments. For example, let’s say your late payments total $6,000.00 and your Chapter 13 plan runs for the full 5 years. There are 60 months in 5 years, so that means you would pay $100.00 per month for 60 months or 5 years after which time the full $6,000.00 ($100.00 x 60 payments) would be paid in full. There are other costs associated with a Chapter 13, which would increase your monthly payment, but in this example $100.00 per month will be used to catch up on your house note. Of course, you will also be required to make your usual mortgage payment in addition to the Chapter 13 payment. As long as you pay the regular mortgage payment along with your Chapter 13 payment the bank will be legally prohibited from foreclosing on your home.
Chapter 7 will have a very different impact on an attempt to foreclose your home. Although the filing of Chapter 7 may delay the foreclosure process, it will not prevent the loss of your home, if you are behind on your payments. In the event that you are just not able to afford your mortgage payment, plus the amount required to catch up on your payments within the 5 years permitted under a Chapter 13, then the loss of your home to foreclosure may be inevitable. A foreclosure, however, does not necessarily erase the money debt owed to the bank. In that case a successful Chapter 7 will eliminate all money owed on the mortgage, so that after taking your home the bank is not ever allowed to collect money from you on this loan.
Also, many people do not realize that a foreclosure can sometime create tax problems for the home owner. When the bank does not recover the full amount owed on the loan they may “forgive” the remaining debt and take a tax write-off instead. Under IRS regulations that “forgiveness of debt” actually becomes income to the home owner, who just lost their home to foreclosure. That income is taxable to the homeowner, the same as if they received a paycheck for the same amount. Of course, that means the homeowner not only lost their house, but then owes taxes to the IRS as a result. In many cases filing a Chapter 7 will avoid the tax, as the debt is discharged in bankruptcy instead of being “forgiven” by the bank.
When facing the loss of your home to foreclosure, consult the lawyers at Heller & Richmond, Ltd. to learn how bankruptcy may either save your home or save you from the further financial hardships that may come with the loss of your home. Know your rights and protect your future.
Phone: 312-781-6700 or E-Mail: MRichmond@Hellerrichmond.com