Chapter 13….Chapter 7

Letter to “Ask Leon”

My husband and I filed chapter 13 a little over a year ago, we live in Michigan. We filed to stop foreclosure on our home, we have missed several payments, had the plan modified because of income loss, however our payments are still too high for us to afford. Our attorney said we could file chapter 7 to give us more time to leave our home. We will lose the house if we file 7, because we can not catch up on all the arrearages and back taxes (3 years). I guess my question is, should we file 7? or just leave as soon as we can without damaging our credit even more?

Leon Says…

Dear Kelly:

I’m sorry you are going through this. At least you gave it your best try. I am assuming that you have enough other dischargeable debt that a Chapter 7 would be worth your while. If so, I think your credit (and your life) will be a whole lot better with a 7 than it will be if you simply dismiss the 13. The reason is because without the 7, you still owe all that other money. I would bet your credit can’t get any worse, but it probably has no chance to rehabilitate if you remain in debt.