If you’re struggling with mortgage payments and facing the possibility of foreclosure in Ohio, understanding Chapter 13 and Chapter 7 bankruptcy and foreclosure is important for making informed decisions about your financial future. Both offer options that address foreclosure, but the benefits and consequences are different, as are their processes.
Chapter 7 Bankruptcy and Foreclosure
What Is Chapter 7 Bankruptcy?
Sometimes called fresh start bankruptcy, Chapter 7 helps people discharge any unsecured debts that they may have, such as medical bills and credit card balances. It’s designed to give a fresh financial start to those who qualify based on their income.
Chapter 7 bankruptcy can temporarily stop foreclosure proceedings through an automatic stay, which is a legal provision that pauses all collection activities against the person. However, the relief given by Chapter 7 is usually meant only for the short term, and homeowners might still have to deal with foreclosure if they can’t bring their mortgage current after Chapter 7 is done.
How Chapter 7 Affects Foreclosure in Ohio
Once you file for Chapter 7, the automatic stay goes into effect and puts a temporary pause on a foreclosure. Unsecured debts might be eliminated, but secured debts like mortgages aren’t discharged. You still have to make those payments if you want to be able to keep your home.
In a lot of cases, those who file for Chapter 7 choose to give up the property to the lender, especially if the home is ”underwater” or they can’t afford the payments. Chapter 7 can be a viable solution if keeping the home isn’t a priority and the goal is to eliminate overwhelming debt.
Chapter 13 Bankruptcy and Foreclosure: A Path to Save Your Home
What Is Chapter 13 Bankruptcy?
Also called reorganization bankruptcy, Chapter 13 lets those with a steady income create a payment plan for their debts. Unlike Chapter 7, it offers a structured way to catch up on missed mortgage payments while keeping possession of your home.
How Chapter 13 Stops Foreclosure
Similar to Chapter 7, Chapter 13 initiates an automatic stay when you file and immediately stops any foreclosure proceedings. It lets you include missed mortgage payments in a payment plan that lasts for up to five years so that you can catch up without having to worry about foreclosure. As long as you make those payments, you can keep your home.
Chapter 13 bankruptcy can be a lifeline for homeowners who want to save their property and get back on their feet financially.
Key Differences Between Chapter 7 and Chapter 13 in Relation to Foreclosure
When you’re making the decision between Chapter 7 and Chapter 13, it’s important to understand how each will impact specific aspects of foreclosure.
Home Retention
Chapter 7 could ultimately end with your surrendering your home if you can’t keep up with the mortgage payments. Chapter 13 offers a structured way to keep your home by catching up on those missed payments.
Debt Relief
The focus in Chapter 7 is to get rid of unsecured debts, but it doesn’t address the issue of missed mortgage payments. On the other hand, Chapter 13 deals with both secured and unsecured debts through repayment plans.
Duration of Relief
Chapter 7 puts a temporary pause on foreclosure through the automatic stay, as does Chapter 13. However, the latter offers long-term relief by restructuring your debt, including your mortgage payments.
Eligibility Requirements
As far as income is concerned, Chapter 7 does have requirements in order to be eligible to file. Chapter 13 only requires a stable income to qualify for a repayment plan.
Choosing the Right Bankruptcy for Your Situation
Filing for the right type of bankruptcy depends on your financial situation, your goals, and your ability to make future payments. Chapter 7 is best if you are in any of the following situations:
- You are overwhelmed with unsecured debt and need a fresh start.
- You don’t prioritize keeping your home or are willing to surrender it.
- You don’t have the income needed for a repayment plan.
On the other hand, Chapter 13 is better for situations where:
- You’re behind on mortgage payments but want to save your home.
- You have a steady income and can commit to making payments for the next few years.
- You need to deal with both secured and unsecured debt.
If you need any help understanding which option is best for you, don’t hesitate to reach out to us for a free consultation. You can reach us at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati).
The Importance of Legal Counsel in Bankruptcy and Foreclosure
It can be stressful to try to deal with the complicated aspects of bankruptcy law and foreclosure, especially when the concepts are completely unfamiliar to you. Working with a qualified bankruptcy attorney can ensure your rights are protected and your case is handled efficiently.
- Your legal team will evaluate your financial situation and give advice on the best way to move forward.
- Your lawyer can help you understand how bankruptcy affects foreclosure and other debts.
- Your legal team can negotiate with your creditors on your behalf.
- Your attorney will file all necessary documents with the court, attend hearings, and monitor all deadlines.
By hiring a strong legal team, you’ll have an easier time making informed decisions and improve your chances of getting the outcome you want while still being able to settle your debts.
Find the Right Path to Financial Stability and Protect Your Home
When dealing with foreclosure in Ohio, the choice between Chapter 7 and Chapter 13 bankruptcy depends on the exact circumstances of your situation as well as your goals and priorities. Chapter 7 might give immediate relief from the stress of a foreclosure, but you might not be able to keep your home in the long run. Chapter 13 gives you the option to keep your home as you work to settle your debts.
It’s important to know the differences between the two and work with knowledgeable legal counsel to guide you through the process. By acting now, you can regain control of your finances and protect your home from foreclosure.
Call Fesenmyer Law Office at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) to discuss your case today.
