When you file for personal bankruptcy in Virginia, you do so through either a Chapter 7 or a Chapter 13 consumer bankruptcy. There are several key differences between the two types of filings, among them the fact that a Chapter 7 filing involves liquidating your assets while a Chapter 13 bankruptcy involves restructuring them.
Per the National Consumer Law Center, if you are facing the threat of foreclosure and are fearful about losing your home, you may want to consider filing for Chapter 13.
Eliminating the threat of foreclosure
How does a Chapter 13 bankruptcy filing potentially help you avoid foreclosure? Unlike a Chapter 7 bankruptcy, which may only delay foreclosure, a Chapter 13 filing has the potential to eliminate the threat of it. How? This type of filing involves you devising a payback plan that enables you to keep your assets, as long as you stay on top of the payments. In addition to paying back some of what you owe, you also need to stay current on your mortgage payments to end the threat of foreclosure.
Reinstating the mortgage
A Chapter 13 bankruptcy may serve your needs well if you started struggling with the mortgage due to a temporary unforeseen circumstance, such as a demotion or a lost job. If you now have regular income available to put toward your debts and mortgage payments, you may find this type of bankruptcy filing especially worthwhile.
When you file for Chapter 13 to stop a foreclosure, timing is important. There are potential drawbacks associated with filing too early or too late.