As
a homeowner you owe it to yourself to get the whole story regarding
Chapter 7 and Chapter 13 Bankrupcy Filing. Filing bankruptcy
will not stop the foreclosure process it will only temporarily
stall the process. Once your Bankrupcy is discharged your
lendor will promptly resume the Forclosure on your home.
What
Will Happen To My Home If I File Bankruptcy?
In most cases
you will not lose your home your bankruptcy case as long as your
equity in the property is fully exempt. Even if your property
is not fully exempt, you will be able to keep it, if you pay its
non-exempt value to creditors in chapter 13.
However, some of your creditors may have a “security
interest” in your home. This means that
you gave that creditor a mortgage on the home. Bankruptcy
does not make these security interests go away. If you do not
make your payments on that debt, the creditor may be able to take
and sell the home or the property, during or after the bankruptcy
case. There are several ways that you can keep collateral or mortgaged
property after you file bankruptcy. You can agree to keep making
your payments on the debt until it is paid in full. Or you can
pay the creditor the amount that the property you want to keep
is worth. In some cases involving fraud or other improper conduct
by the creditor, you may be able to challenge the debt. The answer
depends on the type of bankruptcy you are filing and the status
of any indebtedness on the property in question.
Chapter
7, known as straight bankruptcy, involves liquidating
all assets that are not exempt. Exempt property may include cars,
work-related tools and basic household furnishings. Some property
may be sold by a court-appointed official—a trustee—or
turned over to creditors. You can receive a discharge of your
debts under Chapter 7 only once every six years.
Both types of bankruptcy may get rid of unsecured debts and stop
foreclosures, repossessions, garnishments, utility shut-offs,
and debt collection activities. Both also provide exemptions that
allow you to keep certain assets, although exemption amounts vary.
Personal bankruptcy usually does not erase child support, alimony,
fines, taxes, and some student loan obligations. Also, unless
you have an acceptable plan to catch up on your debt under Chapter
13, bankruptcy usually does not allow you to keep property when
your creditor has an unpaid mortgage or lien on it. Chapter 13
allows you, if you have a regular income and limited debt, to
keep property, such as a mortgaged house or car, that you otherwise
might lose.
In
Chapter 13, the court approves a repayment plan
that allows you to pay off a default during a period of three
to five years, rather than surrender any property.
Stop foreclosure on your house or mobile home and give you a chance
to catch up on missed payments. (Bankruptcy does not,
however, automatically eliminate mortgages and other liens on
your property without payment.)
"Discharge" of debts - After a few months, most of your
debts will be discharged (eliminated). You cannot file another
Chapter 7 Bankruptcy for 6 years.
In Chapter 7, you liquidate your assets, distribute the cash to
creditors and have your debt erased relatively quickly -- usually
within four months. In Chapter 13, you keep your home, but it
takes three to five years of faithfully conforming to a payment
plan before getting your fresh start. In that three- to five-year
plan, you will be able to catch up on your delinquent mortgage
balance.
Equity in your principal residence (called a homestead exemption).
Some states have little or no homestead exemption, while only
a few allow debtors to protect all or most of the equity in their
principal residence.
Home Ownership and Bankruptcy
One other concern besides having equity in your property is the
status of your payments on your mortgage. If you are in
arrears with your mortgage payments, you will almost definitely
lose your property if you file a Chapter 7. The Chapter
7 will stop foreclosure proceedings, but since it does not present
a repayment plan, the mortgage company will file a motion with
the Bankruptcy Court to lift the automatic stay to begin or resume
the process to sell your home. In a Chapter 13, you have an opportunity
not to lose your house if you properly immediately restart making
the regular payments called for under your loan and repay your
mortgage arrears through your Chapter 13 Plan.
