There are several things you must consider before walking away from your home after filing Chapter 13. In a Chapter 13, your mortgage payments are rolled back into the loan, making the mortgage current. This is called a loan modification – eliminating any past due payments. The bankruptcy trustee assigned receives payment from the individual and distributes the monies amongst the creditors involved. This payment plan is usually spread over a 3 to 5 year period of time.
The Chapter 7 bankruptcy is a completely different process. It eliminates your unsecured debt such as personal loans and credit cards. If your income happens to be above the limit (you lucky dog in almost any other circumstance), you would not be allowed to file a Chapter 7. Many people use the Chapter 7 to assist them with their unsecured debt while their mortgage is still current. You are allowed to keep your home as well as some other assets, i.e. vehicles.
If for some reason, your mortgage payment becomes a burden, yet you still cannot qualify for a Chapter 7, you may have to stay in Chapter 13 to pay your creditors. However, a Chapter 13 bankruptcy can be dismissed to allow you to deal with your creditors directly.
A bankruptcy attorney can help you to determine if you can qualify for a Chapter 7. A review of your income weighed against your expenses in addition to any assets is necessary. You can convert your Chapter 13 to a Chapter 7 if you are eligible. At this point, you can walk away from your home and other unsecured debts, giving you the relief you need.
If not eligible for Chapter 7, you can simply stop making your mortgage payments. Your lender will file a motion with the court to remove the property from bankruptcy protection. But remember that the foreclosure process is often long and drawn out depending on the state in which you live. Sometimes the lender offers a loan modification attempting to keep you in your home. In any case, you can stay in the home for quite some time without making a payment until the foreclosure is completed and the house is sold.
Please get in touch if these issues ring true for you – we can assist you in determining what option will best suit your current situation. Contact one of the southern California bankruptcy attorneys at Westgate Law today.