Chapter 7 can help buy time to deal with some creditors or negotiate with others, which may help you keep your home.
Bankruptcy can, in the right circumstances, remove a judgment lien from the title to your home. Here are the conditions for pulling this off.
Bankruptcy is about debts. Different categories of debts are treated differently. The categories are secured, priority and general unsecured.
Filing a Chapter 7 case stops foreclosure of your home temporarily, helping you gather funds for your transition to your next housing.
Execution liens on your home are like judgment liens, "avoidable" in bankruptcy. But only if the underlying debt can be discharged.
Here's an example showing why a judgment lien on your home is dangerous, and how bankruptcy can solve this problem.
Bankruptcy can do more than forever discharge your debts. It can undo some bad creditor actions, like a recorded judgment lien on your home.
A judgment lien effectively converts a debt that was secured by nothing into one secured by your home.
A judgment lien turns an unsecured debt into one secured by a lien on your home. Bankruptcy can undo that, and write off the debt.
A secured debt can be handled like an unsecured debt if you surrender the collateral, "avoid" a judgment lien, or just keep the collateral.
Both Chapter 7 and Chapter 13 can wipe away judgment liens. But doing so under Chapter 13 can be better when used with its other benefits.
Because of Chapter 13's much more powerful automatic stay, its ability to prevent judgment liens and tax liens is extremely valuable.
Creditors with secured debts often have much more leverage against you than with unsecured debts.
The potential ability to get rid of judgment liens from your home's title is an impressive benefit of bankruptcy.
Letting a creditor get a judgment against you is dangerous, for a lot of reasons. One of the biggest dangers is a judgment lien on your home.