Using bankruptcy to fight back against foreclosure

Although things have improved in Ohio recently, the foreclosure rate in the state remains relatively high. According to a recent report from CoreLogic, there were about 27,000 foreclosures last year in the Buckeye State. Although the number of homes in foreclosure have improved this year, Ohio is the state with the fifth highest foreclosure rate, according to the June 2015 National Foreclosure Report.

If you are one of the many Ohioans in this situation, you may have considered bankruptcy as a means of stopping the foreclosure. Although both types of bankruptcy for individuals may potentially help, one type may be better for you than another.

What Chapter 7 can do

Although Chapter 7 is a quick and powerful type of bankruptcy, it offers only limited help with foreclosure. This is primarily because if you do not bring your mortgage current within a few months, your lender may ask the court to lift the automatic stay and proceed with the foreclosure process.

Because of this fact, Chapter 7 can be helpful if you are having problems with your mortgage because of other debts. Since Chapter 7 can quickly discharge most other debt types, it can allow you to devote more income towards your mortgage, which may be enough to allow you to catch up.

Additionally, Chapter 7 is helpful if you wish to surrender your home to your lender, rather than catch up with your mortgage. Chapter 7 can help by protecting you against the possibility of a deficiency judgment. This occurs if your lender sells the home, but at a price that does not cover the remaining amount on your mortgage. In such cases, the lender may normally sue you for any unpaid balance. However, Chapter 7 discharges this type of debt.

Chapter 13 is likely more helpful

Because of the drawbacks of Chapter 7 with regard to foreclosure, most persons with a regular income that want to save their homes find that Chapter 13 is a better fit. In Chapter 13, you have three to five years to catch up on your mortgage, as the overdue balance becomes part of the payment plan. Under the plan you make a monthly payment towards this debt for the 3-5 year period. Since the amount you must pay under the plan is derived from your disposable income, it is affordable for you.

Once the repayment plan has been confirmed, your lender may not start (or restart) foreclosure proceedings against you as long as you continue making the monthly payments. By the time that you have made your final payment under the plan, you have caught up on your mortgage. At this point, you simply resume making the same monthly payments on your mortgage that you made before you filed bankruptcy. However, it is easier this time, as most other pre-bankruptcy debts have been eliminated.

Additionally, if you are underwater on a second or subsequent mortgage, Chapter 13 can eliminate your obligation to repay these additional mortgages in some cases.

Talk to an attorney

If you are among the many facing the threat of losing their homes, speak with the experienced bankruptcy attorneys at Bailey & Gunderson Co., L.P.A. Our attorneys can advise you further about the options available to you and work to get you back on financial track.

Frequently Asked Questions

  • I hear bankruptcy is a lot harder to file now. What is the difference?
    • Since Congress passed the new bankruptcy law in 2005, it is necessary to take two bankruptcy counseling courses. The first bankruptcy counseling course must be taken before you can file your bankruptcy petition, and the second bankruptcy counseling course must be taken before the court will issue the discharge order relieving you from your debt. Both bankruptcy counseling courses can be taken on-line for a small fee, and can be done in a few hours.

      There are also stricter requirements on who can get a total discharge of debts under a Chapter 7 bankruptcy. You must earn under a certain annual income for your area of residence, or you must be able to pass a means test provided for by the bankruptcy law. Under this means test, your income is matched against a formula for average monthly expenses in your area of residence to determine your monthly disposable income. Your debts are compared with your monthly disposable income to determine if you can afford to pay your debts. If you do not pass the means test, you may still get bankruptcy protection through a Chapter 13 bankruptcy where you pay some or all of your debts through a payment plan. While these restrictions limit some people, the bankruptcy attorneys at Bailey & Gunderson have found that the vast majority of people who need the protection of a bankruptcy are still able to take advantage of it.

  • Can I get all debts discharged through Bankruptcy?
    • Under Chapter 7 bankruptcy, you may get a total discharge of your debt. However, some of your debts may not be dischargeable. For instance, income taxes may not be discharged except where the debt is at least three years old, and you filed your income tax return timely. Student loans and child & spousal support obligations are also not dischargeable. Debts incurred through fraud are, likewise, not dischargeable. You may, however, apply to pay these debts through a Chapter 13 payment plan. The bankruptcy attorneys at Bailey & Gunderson can show you how.

  • What happens in a Chapter 13 bankruptcy plan?
    • In a Chapter 13 Bankruptcy plan, you typically pay your debts over a 3 to 5 year period. Each month, you make a payment amount (usually through a wage deduction order from your paycheck) which is then distributed by the bankruptcy trustee to your creditors. Secured debts, such an automobile loan, shall be paid through your Chapter 13 bankruptcy plan. Your non-secured debts will be paid from 1% to 100% of the total amount of your non-secured debt, and will be paid interest-free. The percentage of your non-secured debt that you must pay will initially be determined by the bankruptcy attorneys at Bailey & Gunderson. Once you have completed your Chapter 13 Bankruptcy plan, any remaining debts not paid through your Chapter 13 bankruptcy plan shall be discharged.

  • Will I lose my house, car or retirement savings by filing Bankruptcy?
    • The bankruptcy attorneys at Bailey & Gunderson will work with you to minimize the assets (if any) you may have to surrender when you file for bankruptcy. You are entitled to keep a certain amount of assets, which are "exempt", from seizure by creditors or the bankruptcy trustee. If the Chapter 7 bankruptcy exemptions do not provide enough protection, the bankruptcy attorneys at Bailey & Gunderson can develop a Chapter 13 bankruptcy plan that will preserve your assets.

      Working without an attorney, or with inexperienced counsel, may result in unpleasant surprises for you, as you may have to forfeit assets that you could have saved with better planning. The bankruptcy attorneys at Bailey & Gunderson can show you how.

      The attorneys at Bailey & Gunderson have filed over 1,000 bankruptcy cases. We offer a free initial consultation, and reasonable payment plans for our bankruptcy clients.

      Since 1995, the law firm of Bailey & Gunderson has assisted bankruptcy clients in the greater Cincinnati area (Hamilton, Clermont, Butler, Warren, and Brown Counties). If you have questions or need information about bankruptcy, please call our Cincinnati office at 866-540-8424, or email us.

  • Why Choose a Dissolution of Marriage?
    • A dissolution of marriage offers many advantages over a traditional divorce. The first consideration for many couples is that a dissolution of marriage is a much faster process than a contested divorce. Once your petition for dissolution of marriage has been filed, a hearing before a judge or magistrate shall occur within 30 to 45 days. A dissolution of marriage is usually much less expensive - both in terms of attorney fees and costs, as well as emotionally, because the spouses resolve the issues between them by agreement.

      It is a common misunderstanding that in a dissolution of marriage, the couple hires one attorney who works with them to resolve the issues and generate a separation agreement. In fact, an Ohio attorney can only represent one of the spouses. The family law attorneys at Bailey & Gunderson help to identify all of the issues which need to be addressed in your unique situation. Our firm will work with you to identify all of the assets and debts associated with the marriage, and to determine the most equitable and fair distribution of those assets and debts between the spouses. We also are committed to serving the best interests of your children. Some parents choose to have a shared parenting plan, which allocates the parental rights and responsibilities between the parents, including parenting time, child support, decision making, and payment of health insurance & expenses.

  • What Factors Does a Child Support Calculation Take Into Account?
    • Ohio child support law uses a formula to calculate child support. The law and the formula it establishes look at a number of factors in determining child support. These factors include:

      * The number of children involved

      * The gross annual income of both parents

      * The monthly child support obligations of either parent for other children

      * Existing spousal support obligations from previous marriages

      * Monthly day care, education and health care expenses

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