If you are already knee-deep in debt, cannot anymore escape the calls from the debt collectors, and are defaulting on your mortgage payments, you can put your financial affairs back in order by filing for bankruptcy. As soon as you file your bankruptcy papers, the principle of “automatic stay” takes effect. All your creditors, including the lender you owe your mortgage to, are prevented from taking further action against you.
But you must understand that filing for bankruptcy is only a temporary option and can leave a devastating mark on your credit report. Besides, it will never totally erase your debt. Although a Chapter 7 bankruptcy will erase your credit card debts and other unsecured obligations, you will still be liable for paying for your mortgage. A Chapter 7 might pull down your score big time but as far as avoiding foreclosure is concerned, you will have a higher chance of making the monthly payments on your home since you will not anymore have to pay for your other debts.
In case you fail the Means Test and thus become eligible for a Chapter 13 bankruptcy, you get the chance to sit down with all your lenders to arrange a repayment plan. For as long as you stay faithful to the payments, you will save your home from foreclosure. In addition, a Chapter 13 will not leave such a bad impression on your credit report. It will also stay on your credit report for only seven years as opposed to a Chapter 7 which will remain for ten years.
This program is ideal for anyone interested in real and lasting credit improvement.
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