Can You File For Bankruptcy And Keep Your House?
By Jyoti Jha
Owning a home has always been part of the good old “American Dream.” But if you’re drowning in debt, you must be thinking all the time- Can you file for bankruptcy and keep your house?
Well, as your legal buddy, I can tell you one thing for sure. You must not let the fear of losing your house stop you from getting relief through bankruptcy. When you are under a lot of debt, paying back creditors can seem like a huge burden, along with paying for a house mortgage.
Now, you might be wondering, “Will I lose my house if I file for bankruptcy?” or “Can you file for bankruptcy and keep your house.”
Can You File For Bankruptcy And Keep Your House: Well, Here’s The Truth
Filing for bankruptcy is actually a great way to get rid of the debt you can’t handle. And guess what? It can make it easier for you to keep your home.
So, the answer to that question: “Can you file for bankruptcy and keep your house?” is YES.
So, let me tell you how it works.
Unsecured debts can include things like medical bills, credit card payments, and other loans. When you file for bankruptcy, most of these unsecured debts are exempted. This means that you can be relieved and bid adieu to these bills that are making it impossible for you to make ends meet right now.
You can focus on the things that truly matter to you for your survival. This may include your mortgage payments, utilities, and regular living expenses. It’s the same if you’re renting a place. Rent still needs to be paid along with electricity, water, and other utilities. As soon as the automatic stay benefit takes place on your bankruptcy filing, you’ll be protected from debt collectors.
Can You File For Bankruptcy And Keep Your House: What About Mortage?
Now, let’s talk about what happens to your mortgage when you file for bankruptcy. Home loans, like mortgages, home equity loans are all secured debts. It means the bank kind of has a stake in your real estate. As long as you keep making those monthly payments, the home is all yours to keep. But if you stop paying your mortgage, the bank can take the house back through a process called foreclosure. Yes, that is the case even after you’ve received your bankruptcy discharge.
However, many laws can help you defend a foreclosure case, for which you will need a lawyer. For example, some mortgages qualify for government aid under different eligibility criteria. The foreclosure lawyers will use their expertise to help you keep your property when under financial strain; Click Here to know more. Fortunately, you can file for foreclosure defense even after filing a bankruptcy.
So, keeping your home means keeping up with your mortgage. But filing for bankruptcy can definitely ease your financial burden and give you a chance to focus on what really matters: keeping a roof over your head and paying the bills that keep your home running smoothly.
Can You File For Bankruptcy And Keep Your House: Chapter 7
So, let’s talk about Chapter 7 bankruptcy and how it affects your mortgage. Chapter 7 of the bankruptcy code is known as liquidation bankruptcy. It states that a debtor may sell their assets to repay creditors. However, there are certain exemptions in state laws through which people can protect their homes from being sold. This was done so that a person who is already financially burdened does not lose a roof over their heads.
Now, what does all this mean for you and your mortgage? If you’re up to date with your mortgage payments, not much changes. You’ll just keep making your regular payments until you pay off the house. Simple as that.
What Are The Legal Details?
Of course, there are some legal details that you can leverage with an efficient Chapter 7 bankruptcy representation in Atlanta. Your personal liability gets discharged on the home loan. This protects you if you end up losing the house later on.
- Can you file for bankruptcy and keep your house? If you have enough income to keep paying your mortgage lender, you can keep your home even after filing for Chapter 7 bankruptcy.
- Now, things get a bit trickier if your house is worth more than what you owe on your mortgage. In that case, you might have to deal with the bankruptcy trustee. They’ll handle the legal details for you.
- Chapter 7 can help you surrender it to the bank and get rid of your obligation to pay the loan.
- But if you want to keep the house and you’re behind on payments, Chapter 7 isn’t the best option. It doesn’t have a mechanism to catch up on missed mortgage payments.
- In that case, you’ll still have to rely on the bank’s mercy and their willingness to work with you on modifying the loan. If you can make your full mortgage payments now, Chapter 13 bankruptcy might be a better solution.
Can You File For Bankruptcy And Keep Your House: Chapter 13
If you have enough income to keep up with your mortgage, you won’t lose your home. Chapter 13 bankruptcy involves a repayment plan that lasts 3 to 5 years. Long-term secured debts, like your home mortgage, stay in place. So, just like after a Chapter 7 filing, you’ll keep making your regular monthly mortgage payments.
Chapter 13 of the United States Bankruptcy Code gives a framework for you to create a repayment plan.
- The plan will give you 3 to 5 years of time to prevent foreclosure and losing your assets.
- When you file for bankruptcy under Chapter 13, this stay order goes into effect.
- You can even make a plan to pay up your missed mortgage payments.
- You can make modifications to your secured debts. Changes in interest rates, repayment periods, and similar modifications can be made.
- However, you cannot make any changes to the original loan amount.
What Can Make You Lose Your House?
When you are filing for bankruptcy, you want financial relief from overwhelming debt. So far, we have discussed how you can keep your house while filing for bankruptcy. However, you must also know what are the steps that can lead to you losing the house.
When Filing For Bankruptcy Under Chapter 7
Chapter 7 is the part of the Code through which your assets can be sold to pay your debts. You should know that if your house has a lot of equity (value), you might still lose it in the process. This is because the court will take steps to sell your house and pay your creditors. Contact your attorney to know where you stand with regard to home equity.
The Part To Be Retained Will Be Decided By Homestead Laws
Some States have exceptions where you can protect a part of your home during bankruptcy. However, this part varies from state to state. The solution in this case is to visit a bankruptcy attorney and check if your home is within the exemption limits.
When Filing For Bankruptcy Under Chapter 13
Chapter 13 gives you the right to repay your debts over a time period. Make sure to keep up with these payments; otherwise, if you fall behind, your house may be taken away.
Finally! Can You File For Bankruptcy And Keep Your House: Not Paying Mortgage
But what if you’re behind on your mortgage payments? Ah, don’t worry! Chapter 13 can come to the rescue. It gives you a chance to catch up on those missed payments. Depending on where you live, you might have a few options to save your home from foreclosure.
You can take up to 5 years to catch up on those missed payments. But here’s the catch: Your monthly income needs to be enough to cover both the plan payments to catch up on your home loan and the regular monthly mortgage payments going forward.
Many bankruptcy courts have a mortgage modification mediation program for Chapter 13 bankruptcy. It helps homeowners like you. It can’t force the bank to do anything they weren’t already doing, but it streamlines the process. You submit documents and info through an online porta. The bank reviews everything to see if you qualify for their modification programs. If not, a mediator helps you figure out why you didn’t meet the criteria.
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