Determining Factors For Keeping or Losing Your Home When Filing Bankruptcy
Filing for bankruptcy may feel daunting if you’re not sure what to expect. Many people feel extremely discouraged at the thought of potentially losing their home in the process. Learn more about what will happen to your mortgage loan and your home if you choose to file with a Gilbert bankruptcy attorney in Arizona.
What Will Happen To My Mortgage If I File For Bankruptcy?
It’s understandable to wonder what will happen to your mortgage if you file for bankruptcy in Arizona. Home loans are one of the biggest financial obligations of our lives, and no one wants to be forced out of their home if they are unable to pay their other debts.
The answer is that there are several factors that will determine whether you will lose your home if you file for bankruptcy, including which type of bankruptcy you file for, how much equity you have in your home, and what other debts you have. To fully understand your own situation, consult with a trusted Gilbert bankruptcy lawyer.
Filing Chapter 7 Bankruptcy & Home Loans
A Gilbert Chapter 7 bankruptcy is a type of bankruptcy in which many or all of your assets are liquidated and sold to settle with your creditors and give you a fresh, clean slate. In many cases, this may include selling your home, but not necessarily. The Arizona Homestead Exemption law enables some homeowners to retain their primary residence under certain circumstances. Under this law, up to $150,000 worth of equity in your home is protected and inaccessible to creditors for up to 18 months after you file for bankruptcy. This exemption applies to homes, mobile homes, condos, and land as long as it is your primary residence. In order to utilize the Arizona Homestead Exemption when you file for Gilbert Chapter 7 bankruptcy, you’ll need to meet certain qualifications:
- You must be up to date on your mortgage payments
- You must be financially able to continue making mortgage payments after you’ve filed for bankruptcy
- You must not have a lot of equity in your home
Your Gilbert bankruptcy law office can help you understand whether you qualify for the Arizona Homestead Exemption.
Filing Chapter 13 Bankruptcy & Home Loans
If you’re concerned about keeping your home after bankruptcy, a Gilbert Chapter 13 bankruptcy may be a better option. With this type of bankruptcy, you’ll continue making regular mortgage payments and may be able to adjust your mortgage payments into something more affordable. Chapter 13 bankruptcy essentially restructures your debts. You’ll continue making payments for an allotted time frame, after which the remainder of your debts will be forgiven. Under Chapter 13 bankruptcy, you may also be able to eliminate a second or third mortgage that you’ve taken out against your home.
Can I Surrender My Home In Bankruptcy?
Some people decide during the bankruptcy process that they cannot afford to continue making their mortgage payments long-term. In some cases, the mortgage balance is higher than the value of the house itself. It can be risky to keep your home if you aren’t sure you will be able to stay current with mortgage payments in the future. If you don’t have steady income, are getting divorced, or have non-dischargeable debts such as child support or student loans, you may not be able to pay your mortgage every month.
If you are in one of these situations, one option to discuss with your Gilbert bankruptcy attorney is whether you should surrender your home as part of a Chapter 7 bankruptcy in order to pay off your debts and start over.
Can I File For Bankruptcy After Foreclosure?
If your home has already been sold by the bankruptcy trustee or foreclosed on, filing for bankruptcy may still be helpful. Lenders may be able to charge you with a deficiency balance if your home sold for less at the auction than you owed on the loan. If you file for Chapter 7 bankruptcy after a foreclosure, you may be able to discharge any deficiency balances you owe on the home in addition to unsecured debts. For many people, this brings tremendous relief from an overwhelming financial situation or harassment from debt collectors.
When Can I Qualify For a Mortgage After Bankruptcy?
If you choose to surrender your home in a Gilbert Chapter 7 bankruptcy, you’re probably wondering when you can take out a mortgage loan for another home in the future. You may be able to qualify in as little as 1-4 years following the bankruptcy, although your interest rate may be higher or you may need co-signer. Working to rebuild your credit by paying your bills on time and taking out a secured credit card, while maintaining stable employment, can be helpful in shortening the length of time until you qualify.
Learn More About Bankruptcy and Mortgage Loans
Gilbert Bankruptcy Lawyers is an experienced team of attorneys who fully understand Arizona financial laws and are dedicated to helping people just like you. Whether you are looking to restructure or discharge your debts, we can help invest in your financial future and answer all of your questions about how bankruptcy may affect your mortgage. Call our office to schedule your confidential consultation.