Should You Include A Mortgage In A Bankruptcy?
If you own a home but are in deep financial trouble, you're most likely struggling every month to make your payment on your mortgage. Bankruptcy could offer you a form of debt relief that allows you to restructure your mortgage. Bankruptcy, however, offers two different forms of debt relief; chapter 7 and chapter 13. A chapter 7 bankruptcy involves a court-supervised liquidation of your assets, and in this case, you will not be allowed to keep your mortgage. Chapter 13 Bankruptcy rules, which is also referred to as reorganization bankruptcy, do allow you to keep your mortgage if you are able to restructure your mortgage as part of your reorganization plan.
It is important to understand that the assets and debts you include in your petition are not for you to decide: the law decrees that you must list all assets and all debts, including a mortgage. Bankruptcy courts require a comprehensive overview of your financial situation in order to determine whether you qualify for this form of debt relief. If you qualify for a chapter 13 bankruptcy, you will have enough income to support a repayment plan and most importantly appropriate chapter 13 bankruptcy information. In most cases, banks will be willing to renegotiate the terms of your mortgage.
Bankruptcy reorganization plans and the accompanying repayment plans, once approved by the court, are overseen by the Trustee, which offers lenders such as banks and mortgage brokers more security that they will receive the payments for the mortgage. Bankruptcy attorneys are skilled at constructing these types of repayment plans, and can assist you in the necessary negotiations with your lender. It is essential to realize, however, that seeking protection under the chapter 13 laws has a huge impact on your life for a number of years, and severely compromises your credit.
This is why you should always investigate other debt relief options to help you pay your mortgage. Bankruptcy can sometimes be avoided by means of a debt consolidation that allows you to use your house as collateral for a larger loan while allowing you to pay your mortgage. Bankruptcy can also be avoided in certain cases by applying for a loan modification, which means you renegotiate different terms with your lender in order to afford the monthly payments on your mortgage. Bankruptcy attorneys are always the designated legal professionals to advise you about the options when it comes to your mortgage, bankruptcy and other debt.
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