Florida homeowners who are struggling to make ends meet and do not want to lose their residences have a number of debt relief options, including filing for bankruptcy. The two types of bankruptcy that people file in these circumstances are under Chapter 7 and Chapter 13. If someone is current on their home loan, they can file for Chapter 7 and have their unsecured debts discharged, and there is no repayment plan required.
However, if someone is behind on their mortgage or does not qualify for Chapter 7 because they make too much money, they can still file for Chapter 13. Chapter 13 reorganizes debt and gives individuals a longer amount of time to pay back their loans. If a homeowner is on the verge of foreclosure and files for this type of bankruptcy, it may enable them to keep their home and enable them to become current on their mortgage.
When debtors file for Chapter 13, they are assigned a trustee by the court, and the trustee works out a repayment plan. Individuals pay the trustee a monthly amount, which in the case of a mortgage usually includes their normal monthly loan payments along with an amount that goes to catching them up on late or missed payments. In some cases, people can refinance their home or get a loan modification that helps reduce their normal monthly payments, making the repayment process more manageable.
There are a variety of differences between Chapter 7 and Chapter 13 bankruptcy, although both can help people get their finances on track. Understanding the difference between these filings can help to ensure that the most appropriate form of debt relief is chosen.
Source: FOX Business, “Can I Walk Away From Home in Bankruptcy?”, Justin Harelik, December 11, 2013