Mortgages & Filing Bankruptcy
- Initially, filing bankruptcy immediately stops all collection activities for all debtors, including those of a mortgage company. If the mortgage company is attempting to foreclose on the home, this will stop the foreclosure proceedings, at least temporarily. Once the court receives the bankruptcy petition, the court sends the creditors notification of the bankruptcy and orders them to stop collecting.
Chapter 7 and Your Mortgage
- Filing for a Chapter 7 bankruptcy requires you to reaffirm the mortgage debt if you wish to keep your home. Chapter 7 does not eliminate the mortgage company's right to eventually foreclose on the home if payments are not made. When you reaffirm the mortgage debt, you must be current on the loan and continue to make your scheduled monthly payments. If you do this, you may still file for bankruptcy, wipe out the rest of your debts and keep your home. If you do not reaffirm the debt, the home will be taken and sold and you will not be liable for any outstanding balance on the mortgage.
Chapter 13 and Your Mortgage
- Chapter 13 bankruptcy restructures outstanding debts. If you fell behind on your mortgage, the court may take the outstanding missed payments and stretch them out over 60 months. You still must make your monthly mortgage payments, but this gives you time to catch up with the back payments. At the end of your bankruptcy, your mortgage payments will return to what the previously were before the bankruptcy.
Choosing a Bankruptcy Plan
- During the bankruptcy process, the court evaluates your income. If you earned too much money over the most recent six months, you may not qualify for Chapter 7 bankruptcy. Filing Chapter 13 bankruptcy may be your only option. You may file for bankruptcy protection without an attorney, but bankruptcy laws are complicated. You may wish to have an attorney help you navigate this often-confusing process. This is especially true if you're attempting to save a home with either a Chapter 7 or Chapter 13 bankruptcy.