Homeowners & Bankruptcy
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At the Law Offices of Blake Goodman, we know that homeowners never want to face the possibility of bankruptcy. It’s a taboo word, and in some households even uttering the phrase is considered bad luck. Due to the way bankruptcy is represented in popular culture and the media, people tend to assume they will losing everything, including their home if they file for bankruptcy. Such a thought is terrifying for homeowners.
While we can’t guarantee that you will keep your home when dealing with bankruptcy, what we can say is that it’s not as bad as you might picture. Bankruptcy is there to help anyone in serious financial strife, which is the case for anyone that is dealing with serious debt and foreclosure. While we all would like to believe that owning a home is the ultimate goal, it is not always financially viable. In some cases, it is actually one of the leading causes of financial struggles.
Is Bankruptcy Right for Me?
Bankruptcy is not the great evil it is depicted as. It can help you salvage your finances and, if you do it at the right time, save your home. If you are a homeowner in serious debt, then you need to seriously consider bankruptcy.
If you file for bankruptcy and are successful, you will:
- Be cleared of much of your debt
- Gain a fresh start
- Possibly lower your stress
- Gain a chance at new homeownership
Which Bankruptcy Option Should I Choose?
If we decide that filing for bankruptcy is the best option for you, then the next step will be deciding what kind of bankruptcy you can file for. Since this could potentially be homeownership related, this step may decide if you can keep your home or not. Unfortunately, if the bill is far too high you may be forced to liquidize assets to ensure that your bill is paid off.
- Chapter 7: If you file Chapter 7 bankruptcy, then your debt is going to be removed from your name in exchange for the liquidation of valuable assets. This process can feel painful, but it will ensure that you are debt-free after you have completed the bankruptcy process. Your life will be better off once you are free of the debt that is hounding you everywhere.
- Chapter 13: If you have a certain level of income, and we can argue that you qualify for it, you may qualify for the slightly more favorable Chapter 13 bankruptcy. With Chapter 13 you will not be forced to give up many, if any, assets. You will instead have your debts rolled up into a lump sum that must be paid off monthly.
What Happens To My Home in Bankruptcy?
If you are looking to save the property, a Chapter 13 bankruptcy will allow you to pay off those missed payments over a three to five year period. In order to complete your Chapter 13 plan, you will need to be able to pay both your arrearage payment and your ongoing mortgage payments at the same time. If you make all of the payments under both your Chapter 13 repayment plan and your ongoing mortgage payments, you should be able to avoid foreclosure and remain in your home.
A Chapter 7 bankruptcy provides a short delay in a pending foreclosure. The foreclosure proceeding is typically stopped while a Chapter 7 bankruptcy is pending – which is usually three to four months. Receiving a discharge in a Chapter 7 bankruptcy relieves your personal obligation to pay your creditors back. This does not mean that you get to keep the home without paying the lender for those missed payments. The lender still retains a right in your property even though your personal liability gets discharged in a Chapter 7 bankruptcy.