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Staying Current on Your Payments

Suppose you are current on your payments but expect to fall behind in the very near future for one reason or another. This might be the case if your mortgage interest rate is due to reset higher, you’ve reached the principal cap on an interest-only loan, or you have just lost some work hours or been laid off.

In these and similar situations, Chapter 7 bankruptcy may be a big help. Except for a few categories of debt, such as those mentioned above, you can eliminate virtually all your unsecured debt in about three months. That’s right, all your credit card debt, personal loans, medical debts, money judgments and car repossession deficiencies go away. Once your unsecured debt load is eliminated or greatly reduced, you will have a much better chance of paying your mortgage.

Once you file, you can’t change your mind. For example, if you file for Chapter 7 and then discover that you won’t be able to keep your house, you probably won’t be allowed to back out and dismiss your bankruptcy case. This is because your right to dismiss is based on the best interests of your creditors, and if the creditors would receive a distribution from the sale of your house, their interests require the bankruptcy to go forward.