Can Bankruptcy Save My Clayton County GA home?

Real Estate Agent with Solid Source Realty GA 320764

Georgia Short Sale FAQ



Many times Georgia homeowners will consider filing bankruptcy as a means of avoiding foreclosure. A bankruptcy filing does -- at least temporarily --  halt the foreclosure process immediately upon filing. Lenders can't foreclose or even try to collect debt until permitted to do so by the court.


In this way, a Chapter 7 bankruptcy delays foreclosure. But eventually, it usually results in the liquidation of most of your other assets. The way I understand it, Chapter 7 gets rid of all unsecured debt, leaving only secured debt, such as mortgages, exempt. In this scenario, borrowers still owe their mortgage payments but they are more likely to afford to pay them because all the other debts have been discharged.


Chapter 13 may also be effective at helping you keep your home. It can give you time to repair your finances, usually three to five years, during which time you will adhere to a court-approved income-based budget with monthly payments made to trustees. The trustees pay the bills, first paying off the secured debt first, then the unsecured debt, starting with back income taxes. You MUST be able to stick to the agreed budget.


But either way...bankruptcy takes a huge toll on your future credit-worthiness.


Are there other bankruptcy ramifications and other options you should consider?


I am not an attorney so I cannot give you legal advice, but my advice as a specialist with years of experience helping financially distressed homeowners get mortgage relief in other ways is this: "Don't do it, UNLESS you have investigated all other options.”


Now, if you are over your head and in default on multiple unmanageable debts, are experiencing a long-term and continuing financial deficiency, and don’t see any other way out, then you might want to consult a bankruptcy professional.


But go into bankruptcy with your eyes wide open, understanding the long-term consequences of such an action. There are several serious downsides:


Keep in mind that bankruptcy can lop as much as 240 points off credit your score.


And the bankruptcy can remain on credit reports for ten years, while all other credit blemishes will usually fall off after seven years or less.


Additionally, there are things that bankruptcy courts cannot do:


Contrary to what you might have heard,  your bankruptcy judge cannot "cram down" the balance on your primary mortgage to reduce your debt to what the home is currently worth.


Neither can they modify the terms of the mortgage loan in any other way -- for example, to lower interest rates or lengthen the term of the loans. However, your mortgage lender may be willing to make these changes to your loan agreement if you request a loan modification. Just don’t count on your bankruptcy judge to solve this problem for you. They can’t.


But this doesn’t mean you can’t get any mortgage relief if you keep your home. In a Chapter 7 filing, the court can, in some cases, "strip off" or discharge second mortgages, like home equity loans or lines of credit, when home values fall below the first mortgage balances.


In summary, filing bankruptcy not only ruins your credit for up to ten years, but it also fails to resolve the foreclosure problem. What happens instead?  Once a mortgage holder files bankruptcy, all of your assets come under the disposition of a court-appointed trustee. This effectively means that your property is no longer yours to sell. And here's the kicker: The lender may still foreclose on the property, and you will still be liable to them for the full amount due.


All in all, bankruptcy can be far more damaging to your overall credit worthiness than some of the other mortgage relief options.


There is a better way out.


A bank-approved short sale, on the other hand, is a much better solution all the way around. 


I consider a pre-foreclosure sale to be a successful sale, because it prevents bank foreclosure. so, I am on a mission to assist as many homeowners as I possibly can to avoid foreclosure through pre-foreclosure sale. I've written a book on how to Avoid Georgia Foreclosure that you can purchase at because I know how to help make this happen. I've invested extensive time and money to learn everything I can about the Georgia foreclosure process and how to prevent it.


Put my expertise to work for you by giving me a call today.  



Comments (2)

Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

This is excellent information for those who have wondered if bankruptcy can save their homes.  There will be variances around the country.  I agree with Will Allen's #1 comment, A short sale is a better way to go.

Jun 25, 2017 05:04 AM