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The majority of dismissed cases was because homeowners didn’t or couldn’t make their payments. Whatever the reason, the debts are still owed, which puts you right back where you were before filing. The good news about filing for Chapter 13 bankruptcy is that it’s designed to allow you to keep your house. With Chapter 13, you, the bank and your creditors all decide on a repayment plan that takes three to five years, but your assets are not sold off.
The Wildcard Exemption
During chapter 13, your monthly payments will be made either voluntarily, or directly through a paycheck withdrawal. In either case, the payment is sent to your bankruptcy trustee, and the bankruptcy trustee will disburse the funds to your mortgage company and other creditors. At the end of the plan, some of your debt balances can be discharged, meaning you don’t have to pay the remaining bill. You will, however, have to continue making any payments that are due on your mortgage. But unlike chapter seven bankruptcy, chapter 13 can save certain property, including your home. Without any mortgage or liens on your property, it’s very possible that your home will be worth enough for the trustee to sell.
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Go To Your Local Bankruptcy Court To File Your Forms
The trustee will send you a letter asking you to mail them certain financial documents, like tax returns, pay stubs, and bank statements. If you don’t send the trustee the requested documents following the instructions provided in their letter, you may not get a discharge of your debts. A bankruptcy discharge doesn't wipe out certain non-dischargeable debts like child support obligations, alimony, and recent tax debts. If you have any co-signers, they won't be protected by your personal bankruptcy.
The Automatic Stay Provides Temporary Relief
If this is the case, you’ll need to figure out whether your state’s homestead exemption is high enough to cover your equity. However, the trustee will sell the house if your exemptions protect only a portion of your equity. The sales proceeds will be used to pay mortgages, HELOCs, and liens. Creditors will receive whatever remains after deducting sales costs. Credit counseling through a nonprofit agency can help you develop a debt management plan with payments you can afford so you can avoid bankruptcy. If the credit counselor is able to work with creditors to lower the payments and interest rates on your unsecured debt, like credit cards, it could avert a bankruptcy filing.
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We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. Nineteen states allow you to choose between their state exemption system or a separate set of federal bankruptcy exemptions. You cannot mix and match from the two different exemptions systems. In a Chapter 7 bankruptcy, the court would consider what you had in equity, after the exemption, to pay off your debts. If your equity after the exemption is little or nothing, you would likely be allowed to keep your house, since selling it wouldn’t generate much money.
Chapter 7 Bankruptcy: What Can You Keep?
In principle, your trustee is entitled to seize and then resell your car. From the sale proceeds, the trustee would have to give you your $5,000 exemption amount first. In reality, though, the trustee will have significant costs in seizing the car and then reselling it, so after all these costs are factored in the trustee will have less than $5,000.
Instead, you’ll pay back the investment and a percentage of your home’s future appreciation anytime during a 30-year term. But the amount of these items that you are able to protect varies by state. Bankruptcy was created because Congress believed that Americans who are in financial trouble often need a “fresh start” in the form of a bankruptcy discharge.
How Does Chapter 7 Bankruptcy Affect My Existing Mortgage?
Finally, because bankruptcy involves a major credit hit, you should consider all possible alternatives. If you’re having trouble making your mortgage payment, you might consider applying for a modification, short sale or deed in lieu of foreclosure. It’s possible to get a mortgage after bankruptcy is dismissed or discharged.
In this plan, you pay down some of your debts through a Chapter 13 trustee. At the end of your plan, the rest of your eligible debts are discharged. Your monthly payment is based on how much you’re able to pay. This is determined by the means test analysis, your actual income and expenses and the terms of your repayment plan. The Chapter 7 trustee is an official appointed by the court to oversee your case and liquidate, or sell, nonexempt property for the benefit of your creditors.
While this article is intended to serve as a resource, it’s in no way meant to serve as legal advice. Be sure to consult with a law firm that has bankruptcy attorneys who can discuss options and procedures in your jurisdiction. You don't get to wipe out or "discharge" your mortgage and keep your home.
While specifics will vary by state, here’s how the exemption works. When you get a mortgage, your mortgage company gives you a loan. The lender lets you borrow money in order to buy a property.
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