For some people, Chapter 7 bankruptcy is the best way to stop foreclosure in Virginia.
Some people think the only way to stop a foreclosure is a Chapter 13 bankruptcy.
Mark and Tina Allen (not their real names) got a Virginia bankruptcy lawyer who thought that. When they told him they wanted to stop foreclosure on their house, he put them into a Chapter 13. Chapter 13 is a payment plan through the bankruptcy court. Their Chapter 13 plan gave them five years to catch their house up–but the payment was way more than they could afford.
(Mark had been out of work for eighteen months and was now making half of what he had been making. They couldn’t even afford the mortgage payment–much less a catch-up payment, too.)
So, after spending three thousand dollars on that lawyer, their Chapter 13 was thrown out. At that point, they came to see me.
Mark and Tina wanted to stop foreclosure–just for a year, so Junior could graduate from high school with his friends.
In our first visit, Mark and Tina spent more time with me than they had with their first lawyer through the entire bankruptcy process. (That’s what they told me.) When we talked about it, their goals got clearer.
They really did NOT want to keep their house over the long run. (They had bought in 2007, and were still over $100,000 upside down. Unless Mark got hired back in his field, they knew they couldn’t afford it.) They did want to stop foreclosure. They wanted their son to graduate from high school with his friends–then they would be ready to move out. To rent a place that they could afford.
We could do that with Chapter 7. (We needed two Chapter 7 bankruptcies, actually. To stop foreclosure twice.)
First, we put Mark in a Chapter 7 bankruptcy to stop foreclosure scheduled for late June. Chapter 7, around Northern Virginia, gets you at least three months, usually four or five, and sometimes six, seven or eight, before they schedule the next foreclosure sale date.
In Mark’s case, we got six months and two weeks–about what we hoped.
Next week, we’ll do a second Chapter 7–this one for Tina. That will stop the foreclosure that’s scheduled mid January. We hope that will get us to July. Long enough for Junior to graduate with his friends.
When Mark and Tina have to move out, they’ll have a little money saved. They’ve gone a year without making any mortgage payments. That’s given them the cushion they need.
(Mark is still hoping to get back to doing the kind of work he did before his layoff. If their income improves by summer, we can then use a Chapter 13 they could actually afford to catch the house back up–they still want to. Or, see if they can get a loan mod, now that they can show the mortgage company they have money to afford the house.)
Chapter 13 is a powerful tool. It’s a complicated, expensive tool, too. For most things, you want to use the simplest tool that does the job. More than many lawyers around here, I find that Chapter 7 bankruptcy does the job.
If you need to stop foreclosure, a lot of the time Chapter 7 bankruptcy is the tool for the job.