According to World Property Journal, there were 428,000 property foreclosures in the first half of 2017. This is a 20% decline from the same time last year. Typically, homeowners go through foreclosure due to income loss or having a variable interest rate home loan they are no longer able to afford.
Going through a foreclosure can wreak havoc on your personal, financial, and professional life. It causes stress for you and your family. Your credit rating takes a big hit. Your credit score will drop by as much as 250-280 points. Only three years of on-time payments can restore your credit score. Expensive and limited credit are the consequences of foreclosure, making financial recovery very difficult. You’re kicked out of your home, and forced to move. Also, your tax bill for the year may be higher because a foreclosure is considered a taxable event. The IRS states that any money borrowed not paid back is considered income, and therefore, taxable. If possible, you should take any available measures to prevent this from happening. Sometimes, filing for bankruptcy can be a good option to stop a foreclosure and save your home.
A Chapter 13 bankruptcy allows you to develop a plan, with the help of a bankruptcy attorney, to repay all or part of your debts over the course of 3-5 years. A Chapter 13 bankruptcy differs from a Chapter 7 bankruptcy, and has several advantages. The most significant advantage is that a homeowner may be able to save their home under this particular bankruptcy chapter. By filing for Chapter 13 bankruptcy, a homeowner can stop all foreclosure proceedings, and buy some time to develop a plan to catch up on mortgage payments via the payment plan developed as part of the Chapter 13 filing. An experienced Bankruptcy attorney will be able to provide the counsel needed to decide if this is the right path given your unique situation.