What if you don’t want to keep your house, but just need a little more time to find another place to live? Or if you just need to finish a pending sale before a foreclosure happens?
Maybe you don’t want or need the extra benefits of Chapter 13. Or you just want to put everything behind you in a few months instead of the 3-to-5 years that Chapter 13 takes. A Chapter 7 “straight” bankruptcy may give you just the amount of help with your house that you need.
In a Chapter 7 case:
1. As long as you have not filed another bankruptcy case recently, the filing of a Chapter 7 case STOPS a foreclosure just as quickly as a Chapter 13 filing does.
2. A Chapter 7 filing not only stops foreclosures by your mortgage company, but also stops foreclosures by the county tax assessor for unpaid property taxes, by the IRS on tax liens, by ex-spouses on support liens, or creditors who sued you and got a judgment lien attached to your house.
3. Filing a Chapter 7 also PREVENTS most kinds of liens from attaching to your home. This could make a difference of tens of thousands of dollars.
Example: You had $30,000 equity in your home, but owed the IRS $30,000 in income taxes from 4 years ago. If you filed a Chapter 7 case before the IRS attached a tax lien to your home, you may be able to write off the tax debt and keep the equity in your home because of the homestead exemption. But if you delayed filing the Chapter 7 case until after the IRS filed a tax lien, you will have to pay that debt out of the equity in the house (because tax liens trump the homestead exemption), leaving you with nothing.
#1: In a Chapter 7, the minute you file your case, the case trustee has some say in all your property, including any real estate. This may be fine if there is no equity or less equity than the homestead exemption allows. But this is a dangerous area and you absolutely need a competent attorney’s advice.
#2: Chapter 7 IS much less flexible than Chapter 13, and usually buys you less time.