Forbearance in bankruptcy means that a person has
entered into a deferred payment plan with a lender prior to filing a
bankruptcy petition. Forbearance agreements allow borrowers to skip loan
payments for a specific period of time. Lenders cannot commence with
repossession or collection while the plan is effective unless borrowers
default on the terms.
Chapter 13 payments, one of two things will occur. Creditors can seek bankruptcy dismissal or the judge can transfer the bankruptcy into Chapter 7.
Known
as liquidation bankruptcy, Chapter 7 requires property used as
collateral to secure loans be returned or sold to satisfy the note. This
means borrowers will lose their home, car, and anything else they have
financed.
When bankruptcy petitions are dismissed debtors fail out
of bankruptcy and lose court protection. Creditors can take action to
claim collateral property or borrowed funds. This can result in
repossession, wage garnishment, or creditor judgments.
There is a
high probability for foreclosure when debtors enter into forbearance in
bankruptcy and default on court ordered payments. This will also be a
double-whammy to credit reports.
Not only will the bankruptcy be
reflected for 7 to 10 years, debtors will also carry the dark credit
cloud of foreclosure. This combo will be a total knock-out for credit
scores and take years to rebound.
While bankruptcy can cause
extreme credit damage there are times when it must be done. It’s always
best to obtain legal counsel, but even more so when forbearance in
bankruptcy is involved.
http://bankruptcy-auctions.mysurefinance.com/211/bankruptcy-auctions-considerations-of-forbearance-in-bankruptcy/
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