chap 13 bail out foreclosure - Posted by Junior

Posted by Steph on September 19, 2003 at 10:13:49:

Does chapter 7 require one to sell any assets? Or is this a version of a business bankruptcy (ch 11 maybe?). I am looking at a deal now that the guy went through ch13 and couldn’t pay and it got dismissed. He now says he is thinking of ch7. The property i was looking at was his business building and i was wondering if they make him sell his business building for his personal ch7.

chap 13 bail out foreclosure - Posted by Junior

Posted by Junior on September 18, 2003 at 19:31:07:

I heard that from my local investment club… Using chap 13 to short-circuit the foreclosure process from people who received NOD. Would somebody give me an explaination on that? Thank You


Re: chap 13 bail out foreclosure - Posted by JT-IN

Posted by JT-IN on September 18, 2003 at 20:43:54:


A Ch 13 is a Bankruptcy, whereby the Debtor has an opportunity to re-organize their debt, with certain protection from Creditors, to stay off (stop) collection actions. This period of time is limited, and the Debtor must present a re0organization plan, showing how they plan to repay the Creditors, with the plan being acceptable to the BK Court; (and Creditors in turn).

This means that the Debtor must show where they can continue to make existing payments in full, while paying part payments, of past due amounts, so that in a period certain, not more than 60 months, the past due accounts are fully paid while remaining current on the present payments. The percentage of Ch 13 cases where the Debtor completes the plan as presented, thereby paying back all past due debts, is rather low. All too many Debtors use (abuse) the court protection of a Ch 13 as more of a time-management tool, than a repayment technique.

What occurs in real life when a property is scheduled for Sheriff (Trustee) Sale is that near (or on) the date of sale the Debtor will file Ch 13, and the sale will not take place as advertised. Within 6 weeks of a filing, a 341 meeting is scheduled, whereby the Creditors (or their legal representative) attends, as well as the Debtors representative, to present the repayment plan. All too often the Debtor does not even show up to present the plan, or they present a plan that is obviously unacceptable, (usually due to not having enough cash flow) and the case is dismissed. Hence the party being foreclosed of their property rights has bought several months of time. Then the process of advertising begins again; maybe months until the rescheduling of a Sale… then boom, another Ch 13 filing… and so on.

The Debtor Atty’s who specialize in Bk work, defend this practice much in the same way as a Criminal Atty would defend their client… “Better to have 100 people abuse the Bk system and fail to do so, than to have One person who coould reorganize be unable to use their rights to do so… and be foreclosed from their equity…” I guess it depends upon what part of the proecess that you are in, as to how you rationalize this… I think you know where I would fit in on this line of thinking; (not that it is relavent, because the law is the law).

Hope this explanation helps you grasp the concept…


How about Ch. 7?? - Posted by Brian Beard (MD)

Posted by Brian Beard (MD) on September 19, 2003 at 07:50:33:

Thank you for the clarification on Ch. 13. Would you be so kind as to explain the ramifications of a CH. 7. I was working on a preforeclosure who decided to go the Ch. 7 route "to save the house for themeselves??"
I’m a little confused…


Home Ownership and Bankruptcy - Posted by Randy

Posted by Randy on September 19, 2003 at 08:51:05:

Home Ownership and Bankruptcy. If you are behind on your mortgage payments, you will almost certainly lose your house if you file a Chapter 7 bankruptcy. Your mortgage lender will ask the bankruptcy court to lift the automatic stay to begin or resume foreclosure proceedings. In a Chapter 13 bankruptcy, you will not lose your house if you immediately resume making the regular payments called for under your agreement and repay your missed mortgage payments through your plan.

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Re: Home Ownership and Bankruptcy - Posted by Marcos

Posted by Marcos on September 19, 2003 at 09:33:03:

I don’t find that Chapter 7 automatically means you will lose your house, in some instances it has helped people save their houses.

What Chapter 7 does is it wipes off any unsecured debt, credit cards, hospital debt, etc. I have seen homeowners with over a thousand dollars in credit card payments that gets wiped off. Then they can actually afford their home. Plus the banks are sometimes more willing to do a forbearance agreement.

Oftentimes what will happen in cases like these, is the Homeowner will do what’s called a chapter 20. There’s obviously no Chapter 20 that you can do. But, what happens is they file a Chapter 7, thus wiping off their unsecured debt. Then after the Chapter 7 is discharged, they will file a Chapter 13, and reorganize their repayment of their debt. This is usually pretty successful, even if it does pretty much ruin their credit for the forseeable future.

However with all that said, most often bankruptcy IS a pretty good way to actually LOSE your house. Ask a BK attorney how many of their clients actually are able to complete their repayment plan? Nationally I think only 1 in 20 or so are able to do so. The problem is, the house that they couldn’t afford to begin with becomes even more expensive, when they now have to pay for their attorney, the trustee’s fees, and the banks attorney. It’s pretty ugly actually.


Re: Home Ownership and Bankruptcy - Posted by Terry

Posted by Terry on October 17, 2003 at 09:34:02:

My husband and I filed a ch13.I am a home owner,plus i owne a 1998 eclipes.I have been in this ch 13 for 5mos. never been late on payment.BUT I lost my job my husband is still working,I contacted my lawyer on losing my job. Well i had recieved a letter in the mail from the bankruptcy trustee that we are dismised.Why!All my lawyer is saying is to file a ch7 now.But i have to try to get a lien on my car so i will not lose can i protect my car through a ch7 my home i owe on it I feel that something is not right.What is going on.