Too often people hesitate seeking bankruptcy protection because they don’t know how a bankruptcy will impact assets in their life. For example, people naturally fear foreclosure and the loss of the family home. One common question that crosses people’s mind–and maybe yours– “How will bankruptcy affect my mortgage loan?” How bankruptcy will affect my mortgage depends on a couple factors.
Often times it depends on the type of bankruptcy you file for. The two most common types or “chapters” of bankruptcy are called Chapter 7 and Chapter 13. These chapters are formulated differently and usually have different outcomes associated with them. Chapter 7 Bankruptcy helps you by liquidating some of your assets as a means to cancel out various chunks of your debt and give you relief quickly from your creditors. Chapter 13 Bankruptcy on the other hand features a personalized payment program that enables you to get a better financial footing before the end of the case but can last for several years.
A Utah bankruptcy can likely help you to keep your home. Chapter 13 and to some extent Chapter 7 each provide various ways for you keep your home. Although, you cannot just file for bankruptcy protection and not inform your mortgage lender, you can choose how the loan is treated during a bankruptcy case and there are ways to assure the lender that you will be keeping the home and making the mortgage payment.
The good news is your mortgage company cannot raise your interest rate or change other terms of your loan to punish you because you filed for bankruptcy. The bad news is that some homeowners filing for Chapter 7 bankruptcy can lose their home – so it is vital that you consult with an experienced bankruptcy lawyer to help determine if your home may be at risk if you file Chapter 7 Bankruptcy. In a Chapter 13 bankruptcy you can keep your home and continue with your current mortgage even if you are behind on the payments. Your attorney will need to work closely with the mortgage lender to determine the amount of your missed payments and how and when those missed payments will be caught up under the bankruptcy plan.
How will bankruptcy affect my mortgage? I don’t know because I do not know your situation – but when you speak with an attorney it is vital to inform him or her: (1) the current state of your mortgage payments, (2) the value of you home and (3) the amount owed on your mortgage. Once those items are determined then a real discussion can take place to help you make the right decision regarding your mortgage and what a bankruptcy would do to your home. If you would like to meet and discuss a possible bankruptcy give us a call.