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Your Mortgage after Bankruptcy

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Many people who are considering bankruptcy are behind on many of their bills – including their mortgage payments. In this situation, losing your home to foreclosure is a fear that is all too real. You might think that bankruptcy will be a magic cure for all your debt issues, including avoiding foreclosure and keeping your home. However, this is not always the case, and bankruptcy will not automatically guarantee you will be able to stay in your home. The following are some possible scenarios regarding your mortgage after bankruptcy.

Chapter 7 Cases

When you file for Chapter 7 bankruptcy, your property is vulnerable to liquidation. However, there is a homestead exemption that you can apply to your home and, as long as you do not have significant equity built, you likely can keep the house. 

If you are behind on your mortgage payments when you file, Chapter 7 cannot directly address that issue, as this type of bankruptcy does not address any type of secured debt. However, you will be able to stop paying your other debts just prior to and during bankruptcy, and you will not have obligations to pay your discharged debts. In many situations, this frees up funds so you can catch up on your mortgage payments. The automatic stay that goes into effect when you file will halt current foreclosure actions, so this combination of factors can help you become current on your payments, which can allow you to keep your home following your bankruptcy case. 

Chapter 13 Cases

Chapter 13 bankruptcy can help address mortgage problems more directly. If you are behind, you can wrap the arrears into your repayment plan with the bankruptcy trustee. Trying to both catch up on arrears and stay current can be overwhelming, so including the arrears in your repayment plan and paying that amount over the course of three to five years (interest-free) can significantly help this situation. 

Chapter 13 bankruptcy can also help you eliminate second mortgages you have on the property. This is yet another way to prevent foreclosure if you were behind on the second mortgage payments. As long as you remain current on your payments during the course of your case, you will likely be in a good position to keep your house after your Chapter 13 case concludes.

Learn How a Northwest Indiana Bankruptcy Lawyer Can Help

Bankruptcy is not a guaranteed way to keep your home, though an experienced bankruptcy lawyer can assess your situation and help you devise the best plan to get and stay current on your mortgage and prevent foreclosure. Your attorney will help you decide which type of bankruptcy is the best one for your situation, taking into consideration your mortgage and whether keeping you home is a goal in your case. 

Whitten & Whitten helps many clients with Chapter 7 and Chapter 13 cases, and our team regularly helps clients prevent foreclosure as part of their debt relief plan. Contact us to set up a consultation and discuss your options today.

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