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To begin, taking out loans and mortgages on a property is an agreement with a lender to provide "security interest" in case of default payments. This "security interest", also known as collateral, usually manifests itself as a deed to the property so that it could be taken and sold to someone else if payments are not made. The law varies from state to state when it comes to time allowed for non payment. Many state laws allow foreclosure proceedings 10 days after default payment, and a delinquent mortgage manifests itself after 3 months of missed payments.
According to law, creditors have to provide notice on pending foreclosure through a written note more than a month in advance of a possible foreclosure. More... / Hide...
Filing for bankruptcy is a last resort and should be done only after collection procedures begin and mortgage payments are nearly impossible to accomplish. It is advised to consult with a bankruptcy lawyer before filing to see if it is the right solution for your situation. An experience bankruptcy lawyer will be able to recite you your rights and what course of action to take. If bankruptcy is the answer, discussing which type of bankruptcy (Chapter 7 or Chapter 13) to file is the next step.
In a nutshell, Chapter 7 bankruptcy is also known as liquidation bankruptcy and is initiated by a bankruptcy court that decides which of your assets to sell off to pat off remaining debt. Chapter 13 bankruptcy allows homeowners to pay off their debts over time. It doubles as a payment plan with close inspection of how the next three to five years will look like. To differentiate, Chapter 7 bankruptcy is best for people with no steady income and lots of exempt property available. Chapter 13 bankruptcy is for people who don't want to lose their property and have a steady income.