Should one file for bankruptcy while in the foreclosure process or should one wait for after the foreclosure?

by oliver on September 30, 2010

Question:

Should one file for bankruptcy while in the foreclosure process or should one wait for after the foreclosure?

My sister is thinking of filing for bankruptcy, but not sure if she should. She is only going to file because of the HELOC which is $50,000. Should one file for bankruptcy while in the foreclosure process or should one wait for after the foreclosure?

Answer?

Her filing for a bankruptcy would really depend on how much the payment plan will be during the period of bankruptcy. If your sister files for a Chapter 13 now and will include the mortgage debts in the bankruptcy, she will have to pay for those on the plan, in addition to the regular mortgage payment of the house given on a monthly basis. If paying all that amount is too much for her, she will be behind with her payments and the bankruptcy will be dismissed, letting her fall back to the foreclosure process. If your sister can settle some of her other debts in the bankruptcy, she might be able to earn enough income to pay the mortgage on time. If she could free and settle some of the debts and earn enough money, she could apply for a Chapter 7.

Actually, it is never really a good idea to file for bankruptcy in order to have a short-term solution to her problem. Filing a bankruptcy is not advisable most especially if her income will not allow her to make her mortgage payments comfortably during the term of the repayment plan. A more viable solution would be to sell or give the property back to the bank or lender with a deed in lieu of foreclosure. To get more information and help you decide on what step to do, talk to a real estate attorney.

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