Myths and Truths About Chapter 7 Bankruptcy, Part V

(Legal Series: Read the previous parts at www.lickerlawfirm.com)

Myth: A Chapter 7 bankruptcy will prevent a foreclosure or repossession.

Truth: A Chapter 7 bankruptcy will not prevent a foreclosure or repossession. A person should not file a Chapter 7 bankruptcy if they are trying to prevent a foreclosure or repossession and/or are behind on their payments. A Chapter 13 should be filed in that case. In a Chapter 7, a person should be current on their vehicle and/or home. There is an automatic stay that is implemented in the Chapter 7 as well as the Chapter 13; however, there is no repayment plan in a Chapter 7 bankruptcy like there is in a Chapter 13 bankruptcy.

Therefore, if a person files a Chapter 7 bankruptcy when they are delinquent on payments, the creditor will most likely immediately file a motion for relief from the automatic stay. If the debtor is unable to catch up on payments by the time of the hearing on the motion for relief, the court will likely grant the motion for relief, and the car or home can be repossessed or foreclosed.

Myth: In a Chapter 7, debtors will lose their house and/or vehicle.

Truth: In a Chapter 7, debtors will not necessarily lose their house or their vehicle just because it is included in the bankruptcy. All assets must be listed in the bankruptcy petition.