Chapter 7

• When you file for Chapter 7 bankruptcy, your assets are frozen while the attorney for the court and your creditors determine what can be sold to pay off your debt; these assets include your house. If foreclosure proceedings had begun before you filed, they will be put on hold until the lender requests that your house be released so the process can continue. This delay typically lasts three to five weeks.
  The benefit in filing Chapter 7 over Chapter 13 is that you are not obligated to continue to repay any discharged debts.
  
  

Chapter 13

• Homeowners who are behind on payments and have little or no equity in their property might find that filing Chapter 13 bankruptcy is the best way to keep their property from foreclosure. Secured and unsecured debts can be protected under Chapter 13, and the court will administer a repayment plan to bring defaulted amounts current. A trustee oversees timely payments.
  
  

Significance

• The Helping Families Save Their Homes Act, intended to help homeowners who are at risk of foreclosure keep their homes, was signed into law by President Barack Obama in May 2009. The law passed by Congress did not contain the proposed "cram down" provision that would have allowed bankruptcy judges to adjust the amount of principal owed and change the interest rate or duration of the loan, but it did offer new incentives for lenders to negotiate loan modifications with borrowers who are at risk of foreclosure. (See Resources section.)
  
  

Time Frame

• Chapter 13 bankruptcy can be filed in a matter of hours, if you have enlisted the assistance of a bankruptcy attorney and you have the necessary cash to pay the filing fees. This filing immediately halts all foreclosure proceedings on a property and gives you time to make your delinquent payments current.
  
  

Misconceptions

• Homeowners must understand that filing for Chapter 13 stops foreclosure proceedings, but if they don't abide by the repayment plans set by the court and make timely payments, the lenders can foreclose on the properties.
  
  

Warning

• A Chapter 13 bankruptcy cannot protect you if the property already has been sold at a foreclosure auction. If the property has been auctioned and purchased, the right of redemption to the property is null and void. You should check the status of your foreclosure proceeding with the county clerk's office before filing for bankruptcy.