Filing for Chapter 13 bankruptcy can be a confusing and stressful process. Many homeowners facing financial hardship wonder, “What will happen to my house if I file for Chapter 13 bankruptcy?” This article provides a comprehensive overview to help you understand the potential outcomes.
Chapter 13 bankruptcy allows you to keep your assets, like your house, while repaying some or all of your debts over 3 to 5 years. This is accomplished through a court-approved repayment plan. Your repayment plan depends on your income, debts, assets and monthly expenses. The court determines an affordable monthly payment you must make to the bankruptcy trustee, who distributes the money to your creditors. After you make all payments under the plan, the remaining unpaid debt is discharged.
In most cases, yes – you can keep your primary residence if you file for Chapter 13 bankruptcy. However, this depends on a few key factors:
As long as you meet these conditions, you can keep your house throughout your Chapter 13 bankruptcy and beyond. The automatic stay triggered by bankruptcy filing halts any foreclosure proceedings against you.
If your income has decreased substantially, you may no longer be able to afford your monthly mortgage payment. In that case, your bankruptcy attorney can request a loan modification through the court process. The judge may order the lender to modify your loan by:
This can significantly reduce your monthly payments to an affordable level so you can keep your home. Your attorney will negotiate the best possible terms on your behalf.
No, the Chapter 13 trustee does not pay your ongoing mortgage payments. Those remain your responsibility. However, any mortgage arrears (past due amounts) owed can be paid back through your 3-5 year repayment plan.For example, if you are $5,000 behind on your mortgage when filing, the trustee will distribute a portion of your monthly payment to the lender to repay that $5,000 over time. But you must continue making the normal monthly mortgage payments directly.
To successfully complete Chapter 13 bankruptcy, you must make all payments laid out in your repayment plan. This includes staying current on your regular mortgage payments to the lender. If you fall behind, the lender can request relief from the automatic stay and pursue foreclosure again.To avoid this, be honest with your bankruptcy attorney if you are having trouble making payments during the process. They may be able to request a plan modification to temporarily reduce payments until you get back on your feet. This is better than risking dismissal of your case or foreclosure.
Yes, it is possible to lose your home in Chapter 13 bankruptcy if:
Talk to your bankruptcy lawyer if you end up in any of these situations – they’ll advise you on the best options to avoid foreclosure.
Congratulations! After completing all payments under your court-approved plan (usually 3-5 years), you receive a Chapter 13 discharge. This eliminates your remaining unsecured debts, such as credit cards, medical bills, personal loans etc.You get to keep your house free and clear. The bankruptcy discharge order permanently prevents creditors from pursuing you for discharged debts. Your mortgage loan essentially gets “reinstated” – it’s as if you never fell behind on payments.Just remember that your mortgage continues as normal, so you must maintain payments to the lender or risk foreclosure down the road. Avoid taking on additional debt you can’t afford. Stick to financial basics and rebuild your credit over time.
The outcome for your home in Chapter 13 depends greatly on having an experienced bankruptcy lawyer in your corner. Attorneys from Avvo or LawInfo can help negotiate loan modifications, create feasible repayment plans, and walk you through the process start to finish. Reach out for a consultation today.
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