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Bankruptcy fails as foreclosure rescue –

I have written before about bankruptcy and it’s effects on foreclosure in other blog posts.  On I found an interesting article: Bankruptcy fails as foreclosure rescue.

Bankruptcy does have it’s uses in helping people dealing with foreclosure but practically speaking it will never be a foreclosure rescue.  However it has been an excellent strategy for delaying a foreclosure so you can take responsible action to get your situation all straightened out.

Chapter 13 bankruptcy will give you the hope of being able to be rescued from foreclosure because the bankruptcy court will immediately pause foreclosure and if you qualify they will force all your creditors to accept payment plans.  However in the past, chapter 13 bankruptcy plans were so aggressive that the borrowers were even worse off after starting one.  A borrower will typically default on the plan giving the creditors the right to continue collection and in the case of the mortgage company to foreclose.   They can do this even if you are a day late on your payment.

Chapter 7 bankruptcy will not only give you a delayed foreclosure but it will allow you to walk away from your property not having to worry about deficiency judgments. For several reasons if you file chapter 7 bankruptcy and plan on just walking away from your property, you should still sell your home with a short sale (call me 866-SELL-911) because you will still be named in the foreclosure and your home will still foreclose.  This will put a double whammy of foreclosure and bankruptcy on your record which you will do best to avoid.

In the article I linked to the debtor actually filed bankruptcy strategically to delay the foreclosure never following through on either of them.  He then was dismayed to see his properties still foreclose.  The bankruptcy court let that (IMHO) because they could see the borrower had not actually filed bankruptcy in good faith.

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