Southern California Legal Group

Most people we talk to would like to be spared the agony of moving out of their existing home before they’re ready. If they can’t pay their existing mortgage some will apply for a modification before simply succumbing to the foreclosure process.  Unfortunately, the federal Home Affordable Modification Program (HAMP) has failed more people than it has helped.

Only 35% of applicants receive a permanent modification

In a recent interview with HAMP officials, the Washington Post uncovered this statistic:  roughly 1.3 million trial modifications have resulted in about 460,000 permanent modifications.  This means only 35% of people applying for a modification have been helped.

Chapter 13 or Chapter 7 bankruptcy to avoid foreclosure

Bankruptcy is a way to keep your home without a modification.  A bankruptcy attorney can help you navigate the options whether you file Chapter 13 or Chapter 7.

A Chapter 13 bankruptcy plan pays off most secured loans first, taxes, and co-signed debts second, and delays payment of unsecured debts to last. The majority of the initial Chapter 13 payments can be applied towards mortgage and automobile payment defaults. Then, your money goes to pay overdue taxes and co-signed debts. Credit cards and medical bills can be paid after these secured and other priority claims have been paid off. Credit counseling repayment plans, for instance, don’t have the power to delay payments to unsecured creditors without penalty or to give preferential treatment to your car or home finance companies.

As with Chapter 13, a Chapter 7 process  begins with a petition filed in bankruptcy court that triggers an automatic stay (prohibiting further collection efforts of creditors). While the court appoints a trustee to liquidate assets to pay existing creditors, most assets are subject to existing liens or are be exempt from liquidation. I you do not want to lose certain assets in a Chapter 7 bankruptcy, you  may be able to reaffirm certain assets, which keeps the property outside of the bankruptcy by entering into a reaffirmation agreement. While bankruptcy laws are federal statutes, a competent bankruptcy advisor will persuade the court to use state exemptions to maximize the assets you can protect from creditors.

There is no way to walk through the various ways bankruptcy protection can keep you in your current home here. That’s the reason to contact us for a bankruptcy counseling session.