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Should i file chapter 7, 13, or not at all?

Allentown, PA |

My mortgage is 70k under water and the only option left is to walk away. I wish to do so with the least amount of damage to my credit. I have only $3,000 in credit card debt, so really the mortgage is the only issue. bankruptcy will cost $1,500 to 3,000, is it really necessary?

Thank you Andrew....yes I am VERY behind on my mortgage, foreclosure is very near. Staying in the house is NOT an option anymore

Attorney Answers 3


Assuming that you are surrendering the house, a bankruptcy probably makes sense. It will discharge any potential deficiency judgment (the judgment when the house is sold for less than the outstanding mortgage). That way, you can start to repair your credit. If you do not file, you will continue to have that judgment on your credit. If you file, it will be discharged. Often, future creditors look more favorably on a bankruptcy then an outstanding judgment if your credit appears clear after the bankruptcy.

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I am not convinced that bankruptcy is your best option. If you are current on your mortgage payments, and if your income supports an ability to keep making those payments, then why not ride it out until the real estate market comes back. These down and up cycles have happened before. To file a bankruptcy just for about 3K in credit card debt, is not necessarily a great option either.

You would only file a 13 if you were in arrears on the house and you wanted to pay that arrearage back through a chapter 13 payment plan for 3 to 5 years to save the house. But, that is not your situation.

I never "push" a client to do a bankruptcy becuase (1) it is a big step with ramifications and (2) for the amount of work, it is generally not worth it. So, I urge you to find a bankruptcy attorney with the same attitude and get a consultation and have a review of all of the facts of your full and complete financial situation including all assets, debt and income. Only then can you make a wise decision.

Good luck with it.

This answer is provided for informational purposes only. Actual legal advice can only be provided in an office consultation by an attorney licensed in your jurisdiction, with experience in the area of law in which your concern lies.

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The issue is in part whether your lender will come after you for the deficiency when they sell your home. A local attorney that is familiar with your lender may be best able to advise you.

Unless you don't qualify for a chap 7, I see no need for a 13 on these facts. Additional facts and my answer may change.

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