Types of Bankruptcy

Taking out a mortgage can be an enormous step in one’s life. Home ownership, after all, is a major part of the American dream. Purchasing a home will almost certainly require applying for a mortgage, which is a form of debt you will have to pay back over many years. Unfortunately, because of the duration of the loan and its size, many people find themselves with a debt they cannot pay back and are forced to consider bankruptcy.

While bankruptcy is an unpleasant thing to go through, sometimes it can actually be beneficial in the long run. Under United States law, bankruptcy protects you when you are insolvent and provides something of a legal shield for you as you try to get out of debt. There are several chapters in the US Bankruptcy Code which provide for various different circumstances. As a homeowner, you should familiarize yourself with the chapters that could apply to you.

Chapter 7

Chapter 7 is a very common form of bankruptcy that allows both individuals and businesses to liquidate their assets to alleviate their debt. This means that a court will seize or sell some or all of your possessions in order to pay back your creditors – in this case, the mortgage lender. Naturally, you'd want to avoid this, but sometimes it may be necessary.

Chapter 13

Along with Chapter 7, Chapter 13 is the most common type of bankruptcy. Under Chapter 13, you are allowed to restructure your debts over a five-year period, at the end of which you must have your debts paid off or file for Chapter 7 bankruptcy. Under Chapter 13, you can send monthly payment installments to a court-appointed bankruptcy trustee, who will in turn pay back your creditors.

Contact Us

If you or someone you know is facing bankruptcy and would like to pursue mortgage modification as an alternative, contact the Maryland mortgage modification lawyers of Chaifetz & Coyle, P.C., by calling 443-546-4608.