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Bankruptcy and Your Home: What Happens to Your Mortgage?

Bankruptcy is one option for recovering from your debt, and it’s normal to have a lot of questions if you are going through this process. One detail you might be wondering: if I file for bankruptcy, then what happens to my mortgage?

Home Mortgages Are Different Than Other Types of Debt

Because your home is secured by collateral, this mortgage is handled differently than other types of consumer debt. Each situation is decided on a case-by-case basis, depending on the mortgage terms, how many mortgages you have, and how far behind you are on the payments. Also, the type of bankruptcy you file (chapter 7 or chapter 13) will be a factor.

· Chapter 7 Bankruptcy: If you choose to file Chapter 7 bankruptcy, then it means that you are using liquidation to clear your debts. Your property is collected and sold, then that money is distributed to the creditors. When you own a home, the property is taken over to cover the debt that is owed. However, there is an option to claim an exemption that might be a possibility to protect your property in the bankruptcy process.

· Chapter 13 Bankruptcy: With this type of bankruptcy, you can reorganize your debts and reduce the risk of foreclosure by catching up on overdue mortgage payments. This process works by breaking the overdue amount into smaller, manageable payments that you can pay off over a few years. As long as you continue with on-time payments, then it means that you won’t lose the property.

Talk with a Bankruptcy Expert About Keeping Your Home

It makes sense that you don’t want to lose your home in the bankruptcy process. There might be ways to help you hold onto your home while clearing the rest of your debt. A bankruptcy expert can help with options, such as re-negotiating with the mortgage creditor with a reaffirmation agreement filed through the court.

Rest assured knowing that there are options to give you a fresh start without the heavy burden of consumer debt. If you are having a hard time making ends meet, talk to Miles & Hatcher, LLP, about your options for bankruptcy. Call when you are ready to schedule a free consultation: (909) 481-4080.

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