How Chapter 11 Bankruptcy Can Save a Primary Residence

Chapter 11 bankruptcy is sometimes used to reorganize debts so that debtors can keep important assets such as a primary residence. Financial struggles do not have to result in home loss if handled carefully.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is a type of reorganization of debt that is available to individuals and businesses. The court watches over the debtor's finances and allows the debtor to continue either in residence or in business depending on the debtor. Creditors are given the opportunity to vote on the reorganization plan offered to the debtor. Once an agreement has been reached, the debtor must make timely payments on the reorganized debt until the end of the payment period. At this time a final discharge is issued. It is a process, and it will damage credit, but it allows you to keep some assets while reducing your debts.

Businesses that are struggling, but not failing, sometimes benefit from filing Chapter 11 bankruptcy during difficult times. This gives the business some time to grow.

Saving Your Primary Residence

Sometimes it is possible to stop foreclosure proceedings on a primary residence just by filing for bankruptcy. The court will issue a stay generally after the proceedings get started. This has the effect of stopping creditors from taking further action against your assets, such as your home.

Even if your home is not facing foreclosure, if the numbers are not adding up, and you know something has to give, bankruptcy can give you the relief you need to save your primary residence.

What Happens After Bankruptcy?

You might be overwhelmed just thinking about bankruptcy, let alone what happens afterward. Thinking about how to get back on financial track is important since planning is helpful to financial success. Some things to consider include:

• Find ways to clean up your credit and establish new credit after bankruptcy will help you improve your credit score.
• It is vital to pay your bills on time, especially your bankruptcy settlement payments.
• Develop a budget, and stick to it. You can get help with financial planning from savvy friends or an accountant if you have a hard time doing this on your own. 
• Plan and save. There will be rainy days at some point.

Getting Legal Help

If you are considering bankruptcy and facing difficulty paying your mortgage, you should discuss your financial affairs with an experienced bankruptcy attorney as early as possible. Talking with an attorney can help you make wiser decisions about how to move forward and get to better financial ground.