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Foreclosure or reprieve: varying ways Chapter 7 affects your home

Filing for bankruptcy seems like a complicated procedure, and it certainly can be without proper legal representation support you throughout the process. If you secure a reputable attorney, however, with experience in the area of bankruptcy, your Chapter 7 filing can be expedited and your lawyer can guide you through any potential foreclosure or liquidation that results from this filing.

Regarding foreclosure, mortgage and homeownership - how does filing for Chapter 7 bankruptcy affect your home?

If you file for Chapter 7, your assets can be liquidated to cover unpaid debt. Sometimes your assets can be protected, such as pieces of furniture, vehicles or even your home. But by filing for bankruptcy, a court-appointed trustee will review your case and conclude whether your fiscal situation affords you the chance to clear unpaid debt - such as your mortgage. If you cannot protect these costs, your home will be foreclosed.

The foreclosure process will take a little time, but if you wait until the final moments and apply for Chapter 7 just before the foreclosure sale it can delay the proceedings for a while. It could be a few weeks or a few months, but ultimately this is a temporary fix.

Still, this extra bit of time can allow you to resolve any liability issues in your home or to possibly secure a loan modification that could potentially save your home. This time-borrowing method is far from an exact science, but it could help you out depending on the details of your situation.

As is the case in most bankruptcy cases, you should consult an attorney before proceeding with any Chapter 7 activity. There are few filings that are uniform, and little intricacies in your situation could alter the outcome of a bankruptcy filing. So discuss things with a lawyer to learn what course of action is right for you.

Source: FOX Business, "Can Bankruptcy Cause Me to Lose My Homes?," Justin Harelik, Feb. 7, 2012

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