Tuesday, February 14, 2017

What Happens If I Am Behind On My Mortgage When I File Bankruptcy?

There are many reasons to file for bankruptcy. It could be that you have suffered a job loss and can no longer pay all of your bills. Or, you or a family member may have been diagnosed with a medical condition that requires expensive treatments and the doctor’s bills are taking up all of your income. It is also possible that you have accumulated more credit card debt than you can repay, and are struggling to make even the minimum payments. Whatever has caused you to need to file for bankruptcy; there are some things you need to know before you file.

First, there are two chapters of bankruptcy available to consumers; Chapter 7 and Chapter 13. Chapter 7 will wipe out all of your unsecured debt like credit cards and medical expenses, and Chapter 13 will reduce the balances on what you owe to a more manageable level. Another feature unique to a Chapter 13 case is that if you are behind on your mortgage payments when you file a case, you will not be required to pay the entire mortgage arrearage amount up front. IN a Chapter 13 bankruptcy your mortgage is treated as follows:

         The back due payments are paid through the Chapter 13 Plan, which lets you pay just a portion of the amount you are behind instead of getting current on your loan all at once.
         Your regular mortgage payment can also be paid through your Chapter 13 Plan, by the Trustee or you may opt to continue making the payment on your own. If you make the payment on your own you can rest assured the mortgage company will let you know how much is needed for your escrow account as well, so you don’t fall behind on your insurance or taxes. These fees can also be paid by the Trustee, but may require more follow up between the parties to make sure they are covered.
         It is unlikely you will pay off your mortgage over the course of your Chapter 13 case, but when your case is over you should be considered current on your mortgage and have the extra funds needed to maintain the payments because many of your other debts will have been reduced or eliminated.
If you are having a hard time making your mortgage payments, and are unable to come up with a lump sum to get your mortgage loan current, consider filing a Chapter 13 bankruptcy. We can explain how it works, so you are comfortable with your decision.

If you have more questions about bankruptcy how a Chapter 13 can benefit you, contact us today at www.law-ri.com. We will help you get prepared for what comes after we file your case, and have multiple locations where we schedule appointments.

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