The vast majority of Americans will have to take on significant mortgage payments to pay for their homes. A simple change of fortune like the loss of a job, or the development of a medical condition, could cause many people to struggle to afford their mortgage payments. Mortgage debt can add up extremely quickly, and there may seem like there is no way out of it except for selling your home or foreclosure. There are other options, however, like renegotiating your loan payments, a loan modification, or bankruptcy. Declaring bankruptcy can be the kick-start you need to start fighting to keep your home in many cases.
What Happens to Your Mortgage After Declaring?
- You have two options: In Chapter 7 bankruptcy, all or most of your mortgage debt could be discharged within 4-6 months. In Chapter 13 bankruptcy, a new repayment plan lasting three to five years is made to help you pay off your debt. The new monthly payments for your Chapter 13 plan and your mortgage need to be met every month.
- If you have multiple mortgages: Sometimes in Chapter 13 bankruptcy, when your house is worth less than the primary mortgage, your secondary mortgages can be stripped down and changed to unsecured debts. These debts may be dismissed after the plan is paid off.
- Automatic stay: After the bankruptcy is declared, the automatic stay places a hold on creditors’ ability to continue collecting money from debtors. This can give you time to come up with a repayment plan, and protect you from additional debt collections that are not permissible by the bankruptcy court.
- Homestead Exemption: In Texas, there is an unlimited homestead exemption for personal residences. This means, in most cases, you can exempt your entire home and any equity from creditor claims in bankruptcy.
Bankruptcy is a very hard step to take, but taking action sooner rather than later is your best option to keep your home. Pairing up with a Lewisville bankruptcy attorney could be what you need to start handling your mortgage.