Can You File Chapter 13 and Keep Your House?

Knowing how Can You File Chapter 13 and Keep Your House is a win-win situation.

You have probably heard about the major disadvantages of filing bankruptcy. And they are true. You may see a drop in your credit score and find it harder to obtain loans or jobs in the future.

But bankruptcy also has many benefits for people who are in debt.

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What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy can be a solution to unmanageable debt. Chapter 13 bankruptcy allows those with regular incomes to pay back their debts over a period of 3-5 years.

You can discharge some of your debts at the end of the plan. However, you will still have to make any mortgage payments due. Chapter 13 bankruptcy can save your home, unlike Chapter 7.

Here Are Some Important Things You Should Know:

While you are on Chapter 13 repayment you will still have to pay your regular mortgage payment, as well as catch up with any overdue payments (also known by the term “arrears”).
Your 3-5 year payment plan may make it easier to pay off non-mortgage loans.
You’ll need to attend credit counseling, and create a plan for repaying your debts.
To file Chapter 13, you’ll need to pay several fees. These include attorney fees, trustees fees, a case filing fee of $235, and a miscellaneous administration fee of $75.

What Happens to Your Mortgage After Chapter 13 Discharge?

You may be concerned about the fate of your mortgage after a chapter 13 discharge if you plan to file.

In contrast to other debts, mortgage payments are not discharged once you have completed your repayment plan. You’ll need to continue paying your mortgage to keep your house after completing your chapter 13 obligations.

Equity Exemption Under Chapter 13 Bankruptcy

When people consider bankruptcy, they are often concerned about how their home equity is going to be affected.

In most states, you can claim your house as “exempted” property during a bankruptcy. This means that you will not be required to sell your home or tap into the equity in your home to pay off your debt. You should be aware that your first house may not be treated the same as any other properties you own.

You can speak with a bankruptcy attorney if you want to find out if your second home will be safe if you file Chapter 13 bankruptcy.

Mortgage Arrears in Chapter 13

You’ll need to keep up with your mortgage payments during your chapter 13 repayment. But you’ll be expected to pay off any arrears that you may have accrued before declaring bankruptcy.

HELOCs and Junior Mortgages Are Allowed in Chapter 13

In chapter 13, dealing with home-backed loans can be difficult.

You can remove the debt from your home if you can prove that the equity in your house does not cover the amount you owe for a HELOC, or second mortgage. The debt will be treated as any other credit card debt when you file your chapter 13 repayment. The remaining balance will be discharged once you have completed your repayment plan.

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In Chapter 13, You Can Partially Secure Your Home Mortgages

A partially secured mortgage is one that uses your home to secure the debt, but it is less valuable than the amount you owe.

The second mortgage will not be discharged if you have enough equity to cover both your first mortgage and a portion of your partially-secured home mortgage.

You Can Still Pay Your Mortgage if You Are in Chapter 13 Bankruptcy

Your chapter 13 monthly payments can be made either directly from your paycheck or voluntarily. The payment will be sent to the bankruptcy trustee who will then disburse it to the mortgage company and to other creditors.

It’s a good option to select even if it isn’t required. This will help you to stay on track and complete your chapter 13 plan.

Can You Reduce Your Mortgage in Chapter 13 Bankruptcy?

When you declare bankruptcy, it’s rare that your mortgage payment will be reduced.

If you want to reduce your monthly payments, you can work with your lender on a mortgage modification once you begin your chapter 13 payments. You’ll need to get the bankruptcy judge’s approval if the lender approves your modification.

What Is the Impact of Chapter 13 Bankruptcy on Foreclosures?

The filing of a chapter 13 will stop any foreclosure proceedings for your house, but it doesn’t guarantee that your home is safe. You could still face foreclosure even after filing a chapter 13 petition.

Mortgage payments not being made on time.
The bankruptcy court gives permission to the lender to continue foreclosure.

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Can I Sell My Home While Under Chapter 13?

A bankruptcy judge will have to give you permission before you can sell your house during a chapter 13 bankruptcy. Your creditors might also object.

You can keep any money you earn from the sale if you have enough to pay the rest of your repayment plan or discharge your debt.

Can You Get a New Mortgage While in Chapter 13 Bankruptcy?

A bankruptcy filing can make it hard to purchase a new house. You won’t be able to get a mortgage for several years following your chapter 13 discharge. The bankruptcy trustee will also need to approve the new loan.

Alternatives to Chapter 13 Filing for Mortgages

You can save your home through bankruptcy by stopping the foreclosure process, but this may not be your only option. Consider these other options:

Explore your options with your lender for saving your house. Ask about mortgage modifications, including restructuring payments to make them more affordable.
Short sale: You can sell your home instead of going through with foreclosure. The lender will usually forgive the difference between what you owe and the amount of the short sale.
Other help: If your loan is backed up by Fannie Mae, or Freddie Mac you may qualify for help.

Speak to a Credit Counselor About Your Home Before Filing for Chapter 13 Bankruptcy

Chapter 13 filing can be a good way to manage your debts, but it is not always the best option. Only 35% of people who file chapter 13 successfully complete the payment plan.

A nonprofit, certified credit counselor can assist you if you are looking for a solution to your debt. These professionals are trained to help you with your mandatory bankruptcy counseling but also answer difficult questions about money management, and explore your options in order to keep your home.

Do you want to know how you Can File Chapter 13 and Keep Your House?

Contact Our Bankruptcy Attorney Today

Bankruptcy can stop you from getting kicked out of your home, but it’s not a quick or simple solution. It’s really important to talk to a bankruptcy lawyer who can help you with your specific situation.

Bruner Wright P.A. has helped lots of people with bankruptcy, and we’re ready to use our experience to help you too. You can call us at 904.432.1200 to get a free consultation.

Can You File Chapter 13 and Keep Your House?