If you do not know where you are going to come up with the money you need to pay off all the bills and debts you have, you may want to consider evaluating Chapter 7 bankruptcy. This branch of bankruptcy could help you eliminate some of the debts you are having trouble paying; however, it will not stop a foreclosure. If you are facing a foreclosure, you may want to file for Chapter 7, but you should consider getting a loan modification first. Here are several things to understand about this situation.

Why Chapter 7 Does Not Stop a Foreclosure

Chapter 7 bankruptcy is one option you could file, and the other option is called Chapter 13. Chapter 13 does stop foreclosures from occurring, and this is primarily because this branch of law gives you time to pay back debts you owe. The purpose is to give you enough time to catch up on past-due payments you owe, and typically you will get five years to do this.

Chapter 7 does not give a person time to repay their debts. There is no repayment plan of any kind. Instead, people use Chapter 7 for a discharge of unsecured debts, such as from credit cards. If you owe thousands of dollars to credit card companies and cannot get these debts paid off, using Chapter 7 is one way you could eliminate the debts without repaying them.

Unfortunately, filing for Chapter 7 will only give you a temporary break from the foreclosure proceedings your lender filed. Once the court discharges your unsecured debts, your lender can immediately begin pursuing the foreclosure once again. Unless you can somehow pay off all the past-due payments you owe your lender, the lender will most likely foreclose on your home. Because of this, Chapter 7 is rarely a tool people use to stop a foreclosure from going through.

How to Get a Loan Modification

If you have a lot of unsecured debts you cannot repay and you face foreclosure on your home, a bankruptcy lawyer might recommend trying to get a loan modification on your house and then filing for Chapter 7 bankruptcy.

A loan modification is a deal you work out with your lender, but you will not have to do this alone. A bankruptcy attorney can actually handle the entire process for you. If your lender agrees to a loan modification, you will keep the same mortgage you have, but the terms will not be the same.

The lender might drop your interest rate to lower the payments. Your lender could also increase the duration of the loan to decrease your payments. Many lenders also waive past-due fees and interest on loans when they modify them, and this decreases the total amount you owe. When the modification begins, you will be current on your mortgage, and you will have a different amount to pay each month.

Once you complete a loan modification, you will no longer face foreclosure on the house. At this point, you could go through with Chapter 7 bankruptcy to find relief for the unsecured debts you have. In most cases, people can keep their homes when filing for Chapter 7 as long as they are current on the loans, and your loan modification would guarantee that you are current on the mortgage.

Life is not always easy, especially if you are struggling with financial problems. If you would like to find out options for the problems you are having, contact a bankruptcy attorney to discuss your situation. Using a loan modification and Chapter 7 might be a good answer for the financial problems you are facing right now.