Friday, June 23, 2023

How Do I Choose Between a Short Sale and Chapter 13 Bankruptcy to Avoid Foreclosure?

The idea of deciding or choosing between a short sale and Chapter 13 bankruptcy might seem odd at first since you might not realize that both options are potential methods for avoiding foreclosure. Yet once you begin to learn more about foreclosure defense options, and ways of preventing foreclosure, you will learn that there may be multiple options available to you, and two of those options might include a short sale or a Chapter 13 bankruptcy filing. Both options are quite different from one another, aside from the fact that they can both allow a homeowner who is struggling with mortgage payments to avoid having a foreclosure on their record.

Our Oak Park foreclosure defense attorneys can explain more about short sales and Chapter 13 bankruptcy filings under the Bankruptcy Code, and we can clarify how these legal tools can allow you to prevent your home from going into foreclosure.

Short Sales Stop a Foreclosure, End Your Mortgage Debt, But Require You to Leave Your Home

When a homeowner is facing foreclosure, a short sale is a popular tool to stop foreclosure and erase mortgage debt, but it requires the homeowner to vacate the property. In other words, you cannot do a short sale and stay in your home.

What is a short sale? With a short sale, the homeowner finds a buyer who is willing to purchase the home for a price of less than what the homeowner currently owes on the mortgage. Then, the homeowner must get permission from the lender to move forward with the sale, and the lender must agree to take an amount that is less than what is currently owed on the mortgage. Typically, with a short sale, your lawyer will also work out a deal with the lender for the lender to forgive any remaining debt (i.e., the difference between the amount owed on the mortgage and the amount for which the property is being sold). A short sale does not damage a consumer’s credit nearly as much as a foreclosure while giving the debtor a way of preventing foreclosure.

Chapter 13 Bankruptcy Can Stop Foreclosure While Keeping You in Your Home

When should you choose Chapter 13 bankruptcy instead of a short sale? This is often a good option for homeowners who are eligible for this type of bankruptcy and who want to reorganize their debts. With a Chapter 13 bankruptcy, you can stop a foreclosure but also remain in your home and get caught up on your mortgage payments.

While a Chapter 13 bankruptcy might immediately seem like the most appealing option to remain in your home and avoid foreclosure, it is important to consider the effects of a reorganization bankruptcy case. You will need to abide by the terms of a repayment plan in this type of bankruptcy (which will last anywhere from three to five years), and you will need to take into account most non-exempt debt when making payments on this plan for an extended period.

Discuss Your Circumstances with an Oak Park Foreclosure Defense Attorney

If you are facing foreclosure, an experienced Oak Park foreclosure defense lawyer at our firm can discuss the pros and cons with you of a short sale or a Chapter 13 bankruptcy filing. Contact the Emerson Law Firm to learn more.

See Related Blog Posts:

Top Things to Know About a Short Sale to Avoid Foreclosure

Am I Eligible for an Option to Avoid Foreclosure?