Foreclosure and Bankruptcy Decisions

“My attorney referred me to you. I am currently in foreclosure, but in spite of the situation I have a good amount of equity.

Here is the thing, I can file for chapter 13 bankruptcy or a chapter 7 and wipe out all my obligations. I want to keep the home, but I have held off on repairs for some time. But over the next couple of years I will need to get started on some of them.

He thought that you would be able to give me the best recommendation. In advance thank you.”

If the client opted for a chapter 13 bankruptcy, we could do a refinance after 13 months. But it doesn’t solve the overall issue. The home needs extensive renovations, plus there would be about $50,000 in short term debts to repay.

If we filed a chapter 7, he would be able to wipe out all unsecured debts, but there would be two challenges:

• Once the chapter 7 was completed and he was discharged from the bankruptcy, the current mortgage holder can immediately restart the foreclosure. (He is fortunate here because his parents have the ability to bring the loan current and stop the foreclosure process.)
• The other issue is he would need to wait 24 months after the completion and the discharge is issued before being able to obtain a refinance and perform the renovation.

Decisions like this are never easy, for sure.

What option do you think the client chose?