Choosing to file for bankruptcy is a difficult and emotional experience. For many people, one of their main fears is losing their home if they file for bankruptcy. However, in most cases, bankruptcy can prevent your home from going into foreclosure and help you get caught up on payments.
Choosing the best option when filing for bankruptcy is not something you should do alone. With the help of Kain + Henehan you can save your home and get back on track with your finances.
Saving Your Home with Bankruptcy
Filing for bankruptcy is an opportunity for many people to start over. It offers individuals a chance to re-organize their assets in order to get out of an overwhelming amount of debt.
When you file for bankruptcy, this essentially tells debtors that you are working on getting your finances in order. They are required to stop harassing you and give you more time to pay off debts, or even forgive some of your debts.
When it comes to your home mortgage, there are a few things that influence whether or not you will be able to save your home. This includes:
● How much equity you have in your home.
● How far behind on payments you are.
● The type of bankruptcy you are filing for.
Different Bankruptcy Filing Options
There are two options when you decide to file for bankruptcy—chapter 7 and chapter 13. These two options each have their pros and cons; and which option is best for you will depend on a variety of factors. Chapter 7 is designed to get rid of debts through the liquidation of assets; however, your home can still be saved with a chapter 7 bankruptcy. In contrast, chapter 13 bankruptcy allows for the individual to keep their assets, but it forces them to adhere to a very strict repayment plan.
With both chapter 7 and chapter 13 bankruptcy options the court places an “automatic stay” on any pending foreclosures. This means that if your home is in the process of being foreclosed, the bank is not allowed to continue the foreclosure until the courts sort through your finances. This does not automatically mean you will get to keep your home, but it can help you get organized before a foreclosure occurs.
Chapter 7 Bankruptcy
In order to understand how you can save your home with bankruptcy, it is important to have a grasp on what the proceeding will look like. For a Chapter 7 bankruptcy, the court will take control of all of your assets and your debts. Any unsecured assets—assets that creditors do not have any underlying assets they can repossess (such as credit card debts, personal loans, student loans, etc.)—will be disposed of/forgiven. This gives the bankrupt individual more income to put towards their secured assets. They will then look through your assets and determine what can and cannot be sold to pay off your debt. However, not all of your assets need to be sold. You can ask for certain assets to be exempt and this can allow you to save your home.
However, if you are not up to date on your payments, if your home equity is high, or if you mess up on any paperwork, you are still in danger of losing your home. This is because the courts appoint a bankruptcy trustee to oversee your finances. If the trustee interest lies with the creditors, meaning they will do whatever they can to ensure that creditors receive the money they lent out. This can lead to the sale of your home. Similarly, if you are unable to make the mortgage payments with your forgiven unsecured debt, your home will still be foreclosed.
In most cases, a chapter 13 bankruptcy is the best course of option for the individual in debt. Unlike the chapter 7, a chapter 13 bankruptcy is designed to help you keep your assets—including your home. Instead of assigning your case to a trustee, a chapter 13 bankruptcy allows you and your creditors to formulate a repayment plan that gets you back up to speed. All of your unsecured debts are disposed of and your repayment terms are determined. This repayment plan is designed to give you more time to pay off past-due mortgage payments as well as current mortgage payments within 3-5 years.
This means that even if you are behind on payments a chapter 13 bankruptcy will allow you to get back on track. However, during this repayment term, you have to make all on-time payments, not get behind, and you must demonstrate you have enough income to afford these payments. This means that unless you are absolutely positive you can stick to the repayment plan and make the payments on time, you could end up in the same situation as before.
Bankruptcy and Eviction
For some people, the place they call home is rented. So, instead of facing foreclosure, they are facing an eviction if they do not make their payments on time. Filing for bankruptcy can act in the same way and help you avoid being evicted. With a chapter 7 bankruptcy your assets will be liquidated to pay back your landlord. With a chapter 13 bankruptcy, you will create a payment plan to pay back any outstanding rent and future rent. Essentially, no matter where you call home, filing for bankruptcy gives you a second chance at keeping your home.
Finding the Right Solution with Kain + Henehan
Determining what the correct course of action takes a deep understanding of bankruptcy laws. Don’t take it on by yourself. The attorneys at Kain + Henehan are here to help. Our team is ready and willing to assist you in creating a plan that lets you stay on track and keep your home. Call our office today at 612-438-8006 or go online to schedule a free consultation.