How Does Chapter 13 Bankruptcy Affect Your Home?
Debt can cause stress and worry in people, especially when it means your mortgage may not be paid. Chapter 13 bankruptcy can have a positive affect on your home and the rest of your life by eliminating credit card debt and helping you to restructure your mortgage temporarily to a payment you can afford. Filing for bankruptcy can be scary and if you have a home, the level of fear tends to skyrocket. What will happen to the house? Will you be homeless? Will it be difficult to obtain credit required to rent or own another property? These are just a few common questions asked by people considering Chapter 13 bankruptcy. Know that a Chapter 13 bankruptcy can stop foreclosure and help you save your home – find out how by speaking with a bankruptcy professional!
Chapter 13 Bankruptcy and Your Home
A bankruptcy attorney puts fears to rest by explaining that property is usually not in jeopardy during a Chapter 13 bankrutpcy filing. If mortgage payments are current, the home is in the clear. If payments are past-due or the home is headed for foreclosure, mortgage arrears can be included in the Chapter 13 payment plan, which features a three to five-year repayment time-frame. You will repay debts gradually and save your home in the process. One of the most important first steps to fighting the foreclosure process and finding out how Chapter 13 bankruptcy can help you save your home is making an itemized list of your debts. This is absolutely a necessary step for anyone filing for bankruptcy. Bankruptcy attorneys require their clients to obtain a recent credit report and score to determine which debts will be erased, and which will need to be put into the repayment plan to save your home. You can obtain your credit information for free right here.
Chapter 13 includes additional ways to reduce debt stemming from a home mortgage. In some situations, a home equity line of credit or a second or third mortgage can be stripped off, substantially reducing the mortgage balance. This is done through a process known as “lien-stripping”, and it is a very effective means of eliminating a huge chunk of debt right off the bat and can help you stop the foreclosure process. Chapter 13 is a great way to reorganize debt and make affordable payments on it without jeopardizing home ownership – it helps you save your home!
What If Your Home Has No Mortgage?
If there is no mortgage on the home, the property may still be retained during Chapter 13 bankruptcy filing. However, unsecured creditors may then be entitled to a larger dividend. This is because the amount that unsecured creditors must be repaid through Chapter 13 is based on the amount of equity the filer has in the home and whether this equity is exempt from the bankruptcy estate. These creditors must receive an amount that equals the value of nonexempt assets. Even if the home is not fully exempt, it may be retained.
Mortgage payments must continue throughout a Chapter 13 bankruptcy case in order to retain the home. This is essential to understand: you must make your payments on time during a Chapter 13 bankruptcy repayment plan. If you miss your payments, your case will be dismissed and it is likely that you will become a victim to foreclosure. Though this type of bankruptcy can delay foreclosure, the home may be foreclosed upon if mortgage payments are not made in a timely manner. The lender retains the lien on the home so it may repossess the property and sell it to satisfy the mortgage balance if payments are not made.
A bankruptcy lawyer will explain in more detail how property is handled during Chapter 13. The bottom line is that as long as you continue the mortgage payment plan and make bankruptcy plan repayments, you will save your home. Talk to a bankruptcy attorney about Chapter 13 bankruptcy today if debts have gotten out of control and more time is needed to repay them.