If you cannot afford to cure your mortgage arrears, a Chapter 13 Bankruptcy offers the option of pursuing a loan modification and holding off on a sheriff sale. While in the Chapter 13, you make good faith payments to your mortgage lender called adequate protection payments (AP). AP is 60% of principal and interest plus 100% of escrow while a loan modification is submitted and pending.

 How much credit card debt do you have? Can you pay this off within 6 months?

I have found this to be a perfect benchmark to deciding whether or not it’s necessary for any potential client to explore bankruptcy. Consider whether you might be able to make some lifestyle changes, buckle down for a while and pay off your debts within 6 months. If not, it’s time to stop the debt from piling up by getting relief via bankruptcy. It’s simply too difficult to overcome a debt so large. And debt settlement or debt management doesn’t work. Over 75% of my clients tried some form of debt management but needed to file bankruptcy anyway.