Chapter 7 bankruptcy is used to delay foreclosure rather than block it permanently. Chapter 13 bankruptcy is used by homeowners to save their homes.
But even if you think you’ll need to give up your house, Chapter 7 bankruptcy can be a very valuable tool in the midst of a foreclosure because you can delay the inevitable foreclosure by two to four months and get all or most of your debts permanently discharged so that you have have a fresh start after foreclosure.
When you file bankruptcy, the federal bankruptcy court issues a court order called a stay. The stay bars all creditors, including mortgage lenders, from taking any measures to collect a debt unless the court holds a hearing and grants permission.
Does it make sense to forgo the inevitable – the foreclosure? The answer really depends on your situation and cannot be simply be answered Yes/No. I don’t recommend filing Chapter 7 bankruptcy simply to delay foreclosure but other attorneys may disagree with that opinion and take your money. Now, if you have a ton of unsecured debt (medical bills, credit card bills, lawsuits) I would suggest that Chapter 7 bankruptcy is an option in order to obtain a fresh start with our without a foreclosure pending.
The answer to filing bankruptcy can be found in a legal test created by Judge Learned Hand. He developed a test call the cost benefits analysis. You simply look at the cost of filing bankruptcy (downside) versus the benefits of filing bankruptcy (upside) and you arrive at a logical conclusion that filing bankruptcy is either more costly or more beneficial. Judge Learned Hand created this test as a logical tool to arrive at a logical answer. Try it sometime and you will discover the right solution in your situation.
Let me know if I can help you arrive at a solution!
Stephen M. Dunne, Esq.
Dunne Law Offices, P.C.
1500 JFK Boulevard, Two Penn Center,
Philadelphia, PA 19102
(215) 854 – 6342 office
(215) 205 – 6367 cell
(215) 569 – 0216 fax