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Maintaining Home Ownership After Filing for Bankruptcy

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Maintaining Home Ownership After Filing for Bankruptcy

Bankruptcy often comes as a decision that can be quite overwhelming to many people. It’s the last resort for consumers to deal with the debt that they can’t afford. Catching up after falling behind on your mortgage payments can be challenging. The additional late fees, unpaid debt, and the refusal of partial payments can all be devastating. Moreover, after a time frame of 90 days, your mortgage lender even has the right to accelerate your loan and demand for the loan balance to be paid in full. In case you find no way to catch up, the mortgage company can seize your home through foreclosure. However, did you know you can use bankruptcy as a method to gain control of your mortgage? While maintaining your home ownership?

Chapter 13 Bankruptcy

Chapter 7 bankruptcy involves the liquidation of all non-exempt assets. However, you are likely to maintain your home ownership when filing Chapter 13 bankruptcy.

Under Chapter 13 bankruptcy, you ought to draft a repayment plan with the repayment period extending anywhere from 3 to 5 years. Seek help from a bankruptcy attorney in making the repayment plan sound reasonable. Before submitting it to the court.

The bankruptcy trustee reviews your plan to make sure that it’s practical. Then the agreed-upon payments should be made to the trustee. The trustee further distributes the payment among your creditors.

Automatic Stay

Once you file bankruptcy, your creditors are supposed to straightaway suspend all the collection activities. Including the procedures related to foreclosures against you. The period of time until this practice remains is known as ‘automatic stay’.

Normally, the automatic stay remains effective until the bankruptcy judge confirms, or dismisses the repayment plan, or you change your case into a different bankruptcy chapter. After the court confirms your repayment plan, you must officially start making payments. Payments to the lenders and creditors as per the plan.  

Discharge

The court discharges your bankruptcy case immediately after you complete the repayment plan. Furthermore, the court discharges any unsecured debt that wasn’t paid off during the repayment period.

They only include your mortgage debts under the repayment plan, and thus you would still owe monthly mortgage payments throughout the duration of the process as well as after its fulfillment.

Nevertheless, you wouldn’t still owe any additional charges acquired prior to filing the bankruptcy as Chapter 13 discharge disregards your accountability to pay off any other forms of debts such as collection accounts, and credit card debts.

To put it short, once you complete the repayment plan, you will find that you have a more disposable income than the one you had before filing bankruptcy. This makes it even easier to pay off your mortgage.

Dismissal

If you really plan to maintain your home ownership from foreclosure, you thoroughly have to comply with the court’s instructions and keep up with the bankruptcy payments. In case, you fail to follow the court’s additional demands or not attend to your repayment plan, the court can dismiss your bankruptcy.

This can put to you back into the hands of mortgage lenders without the protection of automatic stay. They will once again initiate foreclosure proceedings against you in the worst case scenario.

Looking to file bankruptcy? At Bartifay Law Offices, we have bankruptcy attorneys ready to help you with your requirements. Get in touch with us today to learn more about bankruptcy and foreclosures.

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