If you have mounds of debt piling up, you might need to file for Chapter 13 bankruptcy to get out from under your financial distress. While this is one of the best options to eliminate your debt, you may have some hesitancies – especially if you own your home.
A common concern we hear from clients is they don’t want to file for bankruptcy because they are afraid they will lose their home. If you are behind on your mortgage payments, our attorneys will explain how your mortgage is handled during a Chapter 13 bankruptcy, and what that means for you. With the help of your bankruptcy attorney, you can take the right steps to keep your house.
How Mortgages Are Handled in Chapter 13 Bankruptcy Cases
One reason homeowners worry about losing their home during bankruptcy is they are confused about how Chapter 13 bankruptcies differ from Chapter 7.
In Chapter 7 bankruptcy, debtors may have to liquidate their assets to pay off some of their debt. While this seems scary, there are ways to protect your property. You can mark some of your assets as exempt to protect them from liquidation. Most of your essential property can be marked as exempt, preventing you from needing to sell them off.
In Chapter 13 bankruptcy, instead of liquidating your assets, you set up a repayment plan with the court. This means that every month you submit a payment to a court-appointed trustee to pay off some of your debts over three to five years. At the end of the repayment plan, any remaining debts will then be discharged.
What does this mean for your missed mortgage payments? You can catch up on your past-due payments through your repayment plan. It allows you to pay off your missed payments – along with your other debts – in affordable monthly installments. Doing this will help you avoid foreclosure, as long as you make the payments on time.
What Happens to Second Mortgages in Chapter 13?
If you took out a second mortgage on your house, sometimes you can get rid of it during the Chapter 13 bankruptcy process. Chapter 13 allows lien stripping to remove second mortgages – or junior liens – after the completion of the repayment plan.
To pursue this, you must work closely with your bankruptcy attorney.
Contact A Chapter 13 Bankruptcy Attorney
When you need to get rid of crushing debt, filing for Chapter 13 bankruptcy can be the resolution you need. If you are worried you will lose your house during the Chapter 13 bankruptcy process, it’s crucial to hire an experienced attorney to help you after the process to navigate your new financial landscape. Our attorneys can help you determine what steps you need to take. We will also help clear up any confusion you might have after your bankruptcy is final! Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.