variation between Bankruptcy and Foreclosure

Foreclosure - variation between Bankruptcy and Foreclosure

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A lot of people who are having a difficult time paying their bills hear the two word "bankruptcy" and "foreclosure". They know that both words have something to do with debts and they want to know what is incompatibility between bankruptcy and foreclosure? Following is a brief frame of the incompatibility as well as an explanation of how the two interact.

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Foreclosure

Bankruptcy:

- Court operation filed by a borrower who is also called a debtor.

- Filed in federal district court in district in which the borrower lives.

- Purpose is to either have debts declared discharged or have protection from creditors.

- Based on federal law and, with a few exceptions, is the same in every state.

- Two types of personal bankruptcy and people must qualify before filing.

Foreclosure:

- Legal operation pursued by a mortgage lender.

- Depending on the state in which the real asset (house) is located, foreclosure may be a court operation or a self help action.

- Purpose is to secure either (1) the money owed to the mortgage lender, or (2) the real asset (house) which was given as collateral for the loan.

- Based on state law and is separate in every state.

How the bankruptcy and foreclosure interact:

In most cases, a mortgage lender will pursue a foreclosure action. It can either be a court operation or a self help operation where the lender gives the borrower consideration and then follows the state's laws to secure rights of the borrower's house. After the foreclosure has started, a borrower will file bankruptcy which has an "automatic stay" provision. This means that the foreclosure must immediately stop at least for a temporary time.

There are two types of personal bankruptcy: lesson 7 and lesson 13. In a lesson 7 bankruptcy, the court may sound that unavoidable unsecured debts (such as credit cards, healing bills, etc.) are discharged meaning that a borrower does not have to pay them. With less debts to pay, it may be easier for a borrower to pay his/her monthly mortgage payments.

A lesson 13 bankruptcy is a court ordered payment plan while which a borrower can pay any mortgage midpoint over a duration of time. By not having to pay a lump sum "catch up" amount, it is easier for a borrower to catch up on his/her mortgage payments and therefore easier to keep his/her mortgage intact (and keep his/her home).

This is general data only and not legal advice. If you need definite data or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

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