If you filed for Chapter 13 bankruptcy, included your home, successfully completed a few years of the agreed upon repayment plan, but now find yourself unable to make your modified loan payment, can you walk away from the home? Can a lender foreclose on a home included in a Chapter 13 bankruptcy repayment plan?
The answer is yes.
You can walk away from a home that is included in your Chapter 13 bankruptcy repayment plan even while it is active, but take a minute to make sure that is actually what you want before taking action.
The laws governing bankruptcy and property can bring an assortment of important questions.
Do You Remember Why You Filed for Chapter 13 Bankruptcy?
Some file in order to save their home or get caught up on delinquent mortgage payments. If during the course of your bankruptcy filing, you have also applied and were approved for a loan modification, then your delinquent mortgage payments were absorbed into the loan and your mortgage was brought current. This would indicate to experienced bankruptcy attorneys that you probably make too much to qualify for a Chapter 7 bankruptcy.
Most who are current on their mortgage would choose to file for Chapter 7 rather than a Chapter 13. Filing for Chapter 7 bankruptcy would wipe out any unsecured debt through discharge (i.e. credit cards, revolving credit accounts, personal loans, etc.) while also allowing you to keep your home, vehicles and other assets. Filing for Chapter 13 means agreeing to a repayment plan for some or all of your debt over the course of an agreed upon time period (usually 3-5 years). The bankruptcy petitioner makes a payment to the bankruptcy trustee and the trustee divides that payment amongst creditors.
Petitioners who are current on their mortgage, choosing to file for Chapter 13 instead of a Chapter 7 would do so for one of only a few reasons, the most common of which is: household income is too high to qualify for Chapter 7 bankruptcy.
If you make too much to file for Chapter 7 bankruptcy, you either have to dismiss the case to deal with your creditors directly on your own or stay in your Chapter 13 bankruptcy repayment plan.
Are You Eligible for a Chapter 7 Bankruptcy?
If you are eligible, you could convert your Chapter 13 bankruptcy to a Chapter 7. Doing so would allow you to walk away from your property (and other unsecured debts).
To determine whether or not you are eligible for a Chapter 7 bankruptcy, contact a southern California bankruptcy attorney at Westgate Law to review your income vs. expenses alongside your other assets. You could be eligible for Chapter 7 bankruptcy relief through a discharge of your debt.
Can You Walk Away from Your Property AND Continue with Your Chapter 13?
After determining that you are not eligible for Chapter 7 bankruptcy, you can just stop making your mortgage payment. Doing so will lead your mortgage lender to file a motion with the court to take the property out of bankruptcy protection. Once the bankruptcy protection is removed from the property, they will begin the foreclosure process.
If you still aren’t sure if you should look to Chapter 7 rather than the Chapter 13 you already have in place, contact the southern California bankruptcy attorneys at Westgate Law.