Bad Credit Advisor

What should you do if you’re underwater on your mortgage and you are considering a Chapter 7 or Chapter 13 bankruptcy?  The term “underwater home” refers to houses that have lost so much market value that they are now worth less than the outstanding balance on the home mortgages.  In many cases, a bankruptcy may be able to bring some relief to the owner of the underwater property so they can begin a financial fresh start.

• If a Chapter 7 debt discharge bankruptcy is being planned, the automatic stay will hold off any foreclosure until the Lender obtains Relief from the Automatic Stay or possibly until the discharge of the Chapter 7 case, typically 2-5 months. This could possibly buy the homeowner enough time to catch up with their payments and save the home from foreclosure.
• If the homeowner is significantly behind on the home mortgage, a Chapter 7 will buy the debtor a few months to find a new place to live.  A Chapter 7 bankruptcy will also be of help if the debtor is burdened with significant amounts of credit card debt and other unsecured loans, and it erases the burden of continuing to owe money to the lenders after the home has been foreclosed.

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Medical debt is becoming a leading reason for seeking Chapter 7 or Chapter 13 bankruptcy.  Careful planning and knowing what your options are will keep you safer rather than sorrier.

• According to Atlanta based non-profit CredAbility, about 20% of all newly file bankruptcies this year were related to medical debt as a main cause.  This is a rise — up from an average of 13% just two years ago.