With the changes to bankruptcy laws over the past few years, many people that were once able to slow foreclosure by filing bankruptcy are no longer able to do so. There are even more hoops you must jump through to file and doing so takes time. So if your foreclosure sale date is looming, you’d be wise to read this and take action so you’ll be ready if you need to file for bankruptcy at the last minute.
Get Credit Counseling
To be eligible to file bankruptcy, you must receive credit counseling from a Department of Justice approved agency (see link below) within 180 days before filing for bankruptcy. This counseling can be done on the phone, in person, or over the Internet. If you think you might need to file for bankruptcy to stop your foreclosure, we recommend getting the counseling out of the way as soon as possible so you’re prepared.
At worst, you’ll spend a few hours going through a course you wind up not needing (although you might learn some helpful information?). At best, you set yourself up to be able to file bankruptcy on short notice to delay your sale date.
To get a home mortgage discharged in Chapter 7 or Chapter 13 cases, you will also need to attend a financial management course after you file for bankruptcy.
Pass the Means Test
You must also pass a means test before you can file for bankruptcy. This doesn’t affect most consumers filing for bankruptcy because if your family’s income is below the median income in your state you are protected under a “safe harbor.”
If you’re above these figures, you have to fill out a form that compares your income with your expenses to find out if you qualify to file bankruptcy or not. If you don’t qualify for a Chapter 7 filing, you can still file for a Chapter 13 if you qualify.
Have You filed in the Past?
If you’ve had debts discharged through a Chapter 7 bankruptcy within the past 8 years, you cannot file another Chapter 7 case or a Chapter 13 case for 4 years. As an exception to this, though, if you’ve had a completed Chapter 7 case in the last 4 years and want to file a Chapter 13 case to cure a mortgage default, you can. This Chapter 13 filing will only cover your mortgage debt only, however. The rest of your debt cannot be included.
Helpful links
US Department of Justice’s Trustee Program website: http://www.justice.gov/ust.
Bankruptcy Articles from Truth in Foreclosure
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