If I Want to Own a Home in California After Bankruptcy, Is Chapter 7 or Chapter 13 a Better Option?

Avoiding Bankruptcy Due to Credit Fears? Continued Missed Payments May Do More Harm than Good Many people have correctly heard that bankruptcy will hurt their credit score in the short term. The fact of the matter is that regardless of whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will see a potentially significant decrease in your credit score. However, a credit score is not immutable. While a low credit score following bankruptcy can be expected, individuals who make the most of their fresh start and work responsibly to rebuild their credit often see significant increases in their credit within two to three years. Other people tend to fixate on the fact that a bankruptcy will stay on their credit report for a number of years. It is true that a completed Chapter 13 Bankruptcy discharge will stay on your credit report for 7 years. Similarly, a Chapter 7 bankruptcy discharge will remain on your credit report for up to ten years. However, it is also important to note that late payments and a home foreclosure will also stay on your credit report for up to seven years. Matters that proceed to collections will also stay on your credit report for up to seven years while unpaid tax liens can remain indefinitely. Thus, it is often useful to think of the situation in the following fashion. Doing nothing and allowing the debts to continue to accumulate will undoubtedly result in additional missed payments and other negative treatment on one’s credit report. Even if one can dig out of the mess, it may take many years during which additional missed payments and accounts sent to collections compound the problem. In the alternative, if the individual files for bankruptcy, he or she can either eliminate the debt through Chapter 7 or pay back a portion of the debts through Chapter 13. Thus, the individual will often be able to correct the underlying debt problems sooner than he or she would by paying back creditors. This also means that the individual will be able to start rebuilding his or her credit sooner.

Is a Chapter 7 or Chapter 13 Filing Better if I Want to Own or Keep My Home? In light of the foregoing, many clients then want to know whether Chapter 7 Bankruptcy or Chapter 13 bankruptcy will provide the highest likelihood of achieving home ownership. The truth of the matter is that bankruptcy considerations should first address the underlying debt problem and other goals you may have for your bankruptcy. For instance, if you are already a homeowner with a significant amount of equity in the property, a Chapter 13 filing may be more appropriate because it will allow you to keep the home despite the dip in your credit score. Likewise, Chapter 13 is often more favorable when the individual holds significant secured debts. However, when the potential filer has credit card debt, medical debts, and other unsecured debts a Chapter 7 filing is often the more expedient pathway forward. Due to bankruptcy exemptions available in Pennsylvania, Chapter 7 bankruptcy is also viable in situations where a homeowner has not built significant amounts of equity.

Work with Strategic Sacramento Bankruptcy Lawyers At The Bankruptcy Group, our Sacramento bankruptcy attorneys take the time to understand your financial situation, concerns, and goals. They then work meticulously and methodically considering your full range of bankruptcy and non-bankruptcy solutions to debt problems. To discuss how a Chapter 7 or Chapter 13 bankruptcy can fix debt problems, call The Bankruptcy Group at today. We can arrange for free and confidential legal consultations at our Folsom or Roseville law offices.