Bankruptcy & foreclosure: not an either/or

02 Jan Bankruptcy & foreclosure: not an either/or

The foreclosure is day after tomorrow: I have to file Chapter 7 now, the client insisted. Since I knew she didn’t intend to keep the house, I was baffled. What drove the perceived need to stop the foreclosure?

The client thought that filing bankruptcy first was an alternative way to transferring title to the house to the lender: a foreclosure substitute, she thought, without the “stigma” of foreclosure. Wrong.

Even when the debtor elects in the bankruptcy paperwork to surrender the property, the lender will still have to foreclose (or elect to accept a deed in lieu of foreclosure) in order to terminate the borrower’s interest in the house. The intervening bankruptcy simply alters when that foreclosure takes place.

Examine whether foreclosure is really so damaging that it should be avoided at all costs.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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