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Haghi Law LLC - 151 W. Passaic Ave. Rochelle Park, NJ 07662
We serve all counties in the State of New Jersey
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A Bankruptcy generally removes your personal liability for most types of debt. Bankruptcy historically was intended for use where one was insolvent, meaning that their debts were greater than their assets.
While homeowners may not realize this, if you are in foreclosure, chances are that your are insolvent due to sheer magnitude of the debt owed on most mortgages, particularly where real estate prices have either fallen or not risen.
Bankruptcies are not all the same. To begin with, there are three common variants: Chapter 7, Chapter 13, and Chapter 11. Each type of bankruptcy has certain features and it is critical to select the correct Chapter to file under, depending on your particular circumstances
Chapter 7 - This type of bankruptcy is essentially a liquidation. Under a Chapter 7, you include all your debts in a petition, and once they are discharged, you will not be personally liable for them any longer. Most debts are dischargeable although there are exceptions, such as student loans which are in most cases not dischargeable. For a foreclosure, a Chapter 7 provides a couple things: First, it will impose an automatic freeze on the foreclosure process. Second, it will absolve you of personal liability for the mortgage debt. This means you wont be personally responsible for any amounts owed to the bank. Importantly, the Chapter 7 will not stop the bank from eventually resuming the foreclosure and selling the property at sheriff sale to attempt to satisfy their debt. A Chapter 7 is the most inexpensive type of bankruptcy to file as well.
Chapter 13 - This type of bankruptcy is designed to give the filer time to catch up on payments owed. Generally, a Chapter 13 allows for a debtor to take arrears and divide them into 60 payments which are payable over 5 years. Depending on how much is owed and how much the house worth, a Chapter 13 can be a good option for the right homeowner. We frequently see Chapter 13 bankruptcies filed where they are of little benefit due to misunderstanding about how they work.
Chapter 11 - Perhaps the most famous type of bankruptcy due it being the one major corporations often resort to in tough times, the Chapter 11 is for "restructuring" debt. Although thought of as a corporate remedy, Chapter 11 options can be available to homeowners in certain circumstances, such as for rental properties, or properties where business activity is conducted. Although a Chapter 11 is the most complex and costly type of bankruptcy to pursue, it is the only one where a radical restructuring of a loan is possible.
We have experience with all of the above and can help you determine if bankruptcy is right for your situation, and if so, which type of bankruptcy would work best.
Please contact us for more information regarding bankruptcy options.