- What is the difference between Chapter 7 and Chapter 13 in Bankruptcy ?
- Will I qualify to file a Chapter 7 bankruptcy?
- Under what circumstances should a joint Chapter 7 case be filed?
- What is a “NOTICE OF DEFAULT”?
- What is the NOTICE OF TRUSTEE SALE?
- What happens if I don’t try to save my home and it goes to auction?
- What is a POSTPONEMENT?
- What is a DEFICIENCY?
- What is a LOAN MODIFICATION?
What is the difference between Chapter 7 and Chapter 13 in Bankruptcy law?
If non-bankruptcy alternatives are not feasible, most consumer debtors must decide between a Chapter 7 and a Chapter 13 bankruptcy.
A Chapter 7 bankruptcy is a “Liquidation” bankruptcy whereby certain debts may be discharged and assets are liquidated to pay the debtor’s creditors. Chapter 7 Bankruptcy cases last about six months before a discharge is granted.
A Chapter 13 bankruptcy is a “Debt Adjustment” proceeding whereby the debtor
Chapter 13 cases normally last from three to five years, with a discharge granted at the close of the plan. In chapter 13 cases, the attorney’s fees and administration expenses tend to be considerably more than Chapter 7 cases. If anything is likely to occur during the duration of the case that would prevent the person’s ability to make payments under the plan, and/or if a person is not able to fulfill the terms of a Chapter 13 plan during the entire duration of the plan, chapter 13 is generally not advisable.
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Will I qualify to file a Chapter 7 bankruptcy?
There are certain conditions which must be met in order to qualify to file a Chapter 7 bankruptcy. It is imperative that you ascertain your last six month’s income (from all sources) in order for your attorney to make an exact determination to base your annual income.
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Under what circumstances should a joint Chapter 7 case be filed?
A husband and wife should consider filing jointly if both of them are liable for one or more significant dischargeable debts. If both spouses are liable for a substantial debt and only one files under chapter 7, the creditor may attempt to collect the debt from the non filing spouse at a later time. For married couples, BOTH incomes are considered even if only one spouse is filing, UNLESS they are legally separated and living apart. It is always best to consult with an attorney to discuss your personal circumstances before determining whether or not you should file a Chapter 7 bankruptcy.
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What is a “NOTICE OF DEFAULT”?
After 90 days of not paying the mortgage, the Notice of Default (NOD) is the first step in foreclosure proceedings. The NOD is recorded at the request of the lender by the trustee and is recorded in the county in which the property is located. By recording the NOD, “Constructive Notice” is thereby given to the public. In the state of California, after the NOD is recorded, the borrower and junior lien holders are given notification and the borrower has ninety (90) days to bring their account current. This is referred to as the “Reinstatement Period”.\
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What is the NOTICE OF TRUSTEE SALE?
After 180 days of not paying the mortgage, and if the borrower has not reinstated their account within the 90 day period, the lender will authorize and instruct the Trustee to record the Notice of Trustee Sale (NOS). After 21 days of the recording of the NOS, a FORECLOSURE SALE can take place at public auction. The property may be sold to a third party bidder or REVERT back to the lender for a specified amount.
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What happens if I don’t try to save my home and it goes to auction?
It is crucial that you ACT before your house is sold out from under you! You may be able to postpone the SALE by submitting a LOAN MODIFICATION, OR you may consider filing BANKRUPTCY which will allow you to STOP the sale of your home temporarily which will give you enough time to try and work out your options for moving or retaining your home through a Chapter 13 which will allow you to reorganize your current mortgage debt and continue to pay it back through your plan.
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What is a POSTPONEMENT?
Sales may be postponed by announcement at the time and location specified for the intended sale. You may request a POSTPONEMENT of the sale date if you have submitted a loan modification and are in the process of trying to modify the terms of your loan. There are no guarantees that a postponement will be allowed.
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What is a DEFICIENCY?
Lenders may not seek a deficiency judgement if (1) the foreclosure is non-judicial or if (2) foreclosure is on a purchase money obligation. The same rules do not apply to guarantee or later lien holders. The lenders may seize alternative collateral. If the lender forecloses by filing a lawsuit, then the lender can obtain both a foreclosure sale order and a judgment against the borrower for a deficiency after the court-ordered sale, but only for the difference between the judgment and the fair value of the security.
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What is a LOAN MODIFICATION?
A loan modification is the process by which you request your lender to modify your current mortgage to create better terms. You should consider modifying your current loan if you have had a hardship (i.e family illness, loss of job or decrease in income) and are behind or about to be late on your mortgage and you want to keep your home and avoid foreclosure. You may also consider modifying your current loan if your interest rate is about to adjust to a higher rate you will not be able to afford. A loan modification can help you bring your mortgage current and allow you a fresh start in saving your home. Examples of modifications include lowering your interest rate, extending the length of the loan, forbearance, deferment, reinstatement, and maybe even a reduction in the principle balance.
