Thanks for joining me again, this is Derik Lewis with Lawyers Realty Group in Southern California. If you’re heading towards foreclosure and think that a short sale might be the best option for you, please give me a call. I wanted to touch briefly today on bankruptcy because I’ve had a couple of questions this week about it.
You can file either a Chapter 7 or Chapter 13. A Chapter 7 is a complete liquidation of your assets; you tell your creditors and the court that you’re done and you’re essentially wiping out all of your debts. A Chapter 13 is a reorganization of your debts. You combine all of your unsecured creditors and any amount that you have over your necessities in income, you’ll put towards those creditors for a period of time. If you complete that plan the rest is wiped out and forgiven. In a Chapter 13 you can actually take a second lien holder and tell the courts you would like the lien to be stripped of your property and added in with the unsecured creditors.
The questions I’m getting are how filing a bankruptcy affects a foreclosure. You can file on an emergency basis on the morning of your foreclosure, however I don’t recommend this. The law is clear that if a bankruptcy is filed before the auction occurs at the foreclosure, it would invalidate it but it’s just too dangerous. If you’re looking to postpone that sale and protect assets, you’ll want to have everything in order to be filed at least two business days before your foreclosure sale date. We have a service that we provide as well as contacts for bankruptcy preparers. The lender does have the right to ask for a relief from the stay and proceed with the foreclosure. We’ve seen this happen, so filing bankruptcy isn’t a fail safe to stop the foreclosure process.
Bankruptcy isn’t an alternative to foreclosure because when you do get your discharge, the lender is going to keep putting your home into foreclosure. You have to find a way to address the foreclosure issue, like doing a short sale. We work with the bankruptcy filing and reach out to the lender and start discussing the opportunity of doing a short sale after your discharge. Not only does this buy you extra time, but it also provides you all the benefits that we’ve discussed before about doing a short sale, such as less of an impact on your credit. We have more information on our website about bankruptcy, avoiding foreclosure and doing a short sale on your home. Visit our website at www.LawyersRealtyGroup.com and send me questions because I’d be happy to answer them for you.