Second Mortgage Bankruptcy: Can You Keep Your Home?
The ability to keep your home during a bankruptcy is largely determined by the terms of the particular bankruptcy filed. Assume, with the exception of the mortgage, that you have acquired all the debt-load you can carry. Ideally, you desire to rid yourself of all debts. If this is the case, you will want to file for Liquidation Bankruptcy, also known as “Chapter 7 Bankruptcy”.
After filing under Chapter 7, you will then sell off all your capital and divide the resulting sales among your creditors. While this may postpone the sale of your house, it is only temporary; usually taking between 1 and 4 months to complete the liquidation. Obviously, if you wish to maintain your residence, Chapter 7 is not your best bet.
Now imagine that you want to stay in the home , but you are delinquent on your mortgage by several payments. By this time, the interest and fees have stacked up so high that you are unable to raise enough just to pay them all off, let alone enough to get your account back into good standing.
In this situation, people often choose Chapter 13 Bankruptcy. The Personal Reorganization Bankruptcy is the technical name for cases filed under Chapter 13. There are some big differences between Chapter 13 and Chapter 7. Liquidation bankruptcy alleviates your outstanding debts in 3 to 4 months, relatively fast compared to Chapter 13. However, unlike Chapter 7, it will take between 3 and 5 years to complete the payment plan on a Chapter 13 bankruptcy.
But it is very important, when filing Chapter 13, that you fully disclose all of your outstanding debt; without exception. Student loans, credit cards, bank lines of credit, car and personal loans still count. The court will take all the information and create a repayment contract. If your budget can cover the payments, the best thing, of course, is to pay it all off as soon as possible.
The court will want you to stick to your schedule without fail while the contract is in force. This is easiest accomplished by setting your installments to a level as low as can be managed. Choose the plan that allows you to pay off the greatest amount of debt. Even if that is the 5 year plan. If you still have debt at the end of the contract you may not be able to pay it all. Missed payments could put your house in jeopardy.
Paying off the plan in the 3 to 5 year time table will enable you to begin fresh. You will have a brand-new beginning. Removing your debt gives you a clean page on which to base your revived your economic vitality.
Now, to summarize all that has been discussed. Chapter 13 bankruptcy is best suited towards those who are in arrears of their mortgage payments between 3 to 5 payments and do not possess the funds to bring the loan into good standing. This is a good option provided that you can stay true to your installment plan. If you can not fulfill the requirements of the contract then you may forfeit your home.