Tag Archives: Equity in the home

Homeowners keep their home using Chapter 7 or Chapter 13 bankruptcy laws

Falling behind on mortgage payments can lead to foreclosure. When a homeowner is unable to delay the foreclosure through attempts at refinancing or otherwise negotiating additional time to get caught up, such as a forbearance, short sale, or deed in lieu of foreclosure, the mortgage lender will likely begin the legal process to foreclose and sell the home at auction to receive payment towards the loan. If a foreclosed home sells at auction for less than the amount owed, the lender will likely obtain a deficiency judgment and attempt to collect amount from the homeowner as well. Homeowners fall behind on mortgage payments for many reasons, and the bankruptcy laws help the homeowner save their home from foreclosure sale.

Filing a bankruptcy triggers the automatic stay provision, stopping a foreclosure and sale of the home.

Depending on the homeowner’s income and complete financial situation, they may qualify for a Chapter 7 bankruptcy, a full discharge, or a Chapter 13 bankruptcy, to reorganize and catch up on payments, sometimes a partial amount of the debt amount. When the homeowner files a petition for bankruptcy, the “automatic stay” provision of the bankruptcy code stops the foreclosure proceedings. The court automatically issues an order for relief including the automatic stay. If there is a scheduled foreclosure sale, the bankruptcy postpones the date of sale during the bankruptcy.

Chapter 7 and Chapter 13 bankruptcy both offer options for homeowners who want to keep their home.

If homeowners qualify for a Chapter 7 bankruptcy, based on their income and financial status, the bankruptcy and automatic stay will stop the collection of other debt collectors, which can free up more money to catch up on bankruptcy payments. The state exemptions for equity in the home may allow a homeowner to keep the home and the mortgage if there is not too much equity in the home and the payments are brought current. If however, the payments are not brought current, as soon as the bankruptcy terminates, so does the automatic stay, and a lender may proceed with foreclosure on a delinquent mortgage. If however, either the homeowner does not qualify for Chapter 7 or they need more time to catch up on mortgage payments, a Chapter 13 bankruptcy can be a better choice.

A Chapter 13 notice also stops a foreclosure sale and the lender’s collection actions. Chapter 13 allows a homeowner to “cure” a mortgage default by making up the past due payments, spread over several months of the Chapter 13 repayment plan. Many bankruptcy payment plans last between three and up to five years, which allows the homeowner a long period to cure the mortgage default and catch up on the late payments. It is assumed that the homeowner is making the regular monthly mortgage payment during the repayment plan. When other debt collection is stopped by the automatic stay, the homeowner should have more money available to pay the current mortgage and a portion of the past due amount over the period of the repayment plan.

Bankruptcy can eliminate a homeowner’s liability to pay mortgage deficiencies.

If the lender forecloses on a home when the mortgage is default, the court can order the sale of the home. If the homeowner owes more than the proceeds of the sale of the home at auction, the homeowner is responsible for paying the shortfall; however, the bankruptcy laws allow homeowners to eliminate the mortgage deficiency. Both Chapter 7 and Chapter 13 bankruptcies can eliminate liability for a deficiency judgment. The bankruptcy laws are certainly beneficial to homeowners who fall behind on their mortgage and depending on the individual homeowner’s financial situation, a home can be saved. The attorneys at Joseph Wrobel, Ltd. are experienced in all the complex provisions of the bankruptcy code and they can help homeowners get a fresh start, in their home, and with more money to keep current with monthly bills.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can “Like” the firm’s Facebook page and “Follow” Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.

 

 

Want to keep your house in bankruptcy but don’t know what to expect?

So, you want to clear up bad debt in bankruptcy but want to keep your house? There are many options available for homeowners who have some equity in their house or otherwise really do not want to let go of their great mortgage rate, or simply love their neighborhood. Depending on what state the house is located, there are exemption amounts that allow you to keep equity. Depending on how the numbers come out, you might qualify for a Chapter 7 full discharge but could elect to file a Chapter 13 reorganization so you can keep your house and make monthly payments. Loan modifications may also be attractive to a homeowner, before or after a bankruptcy. Regardless of which options we discuss in this article, one thing remains true; every bankruptcy is different and based on individual financial facts and circumstances. What happens to one neighbor may not be the same for the next.

Regardless of the several options for staying in your home, a bankruptcy, whether Chapter 7 or 13, should free up more cash flow to make mortgage payments if you keep your mortgage. Some people have excellent rates they do not want to lose and others don’t love their current deal but might refinance down the road. In either case, being nickel and dimed shouldn’t be a problem after a bankruptcy.

Homestead Exemptions

If you file for bankruptcy in Illinois, the homestead exemption allows you to protect up to $30,000 of the equity in your home, this assumes a married couple files a joint bankruptcy case because the individual exemption amount would be $15,000 per individual. Note also that you must be the legal owner of record and your name must be on the deed to the property to exercise your right to the exemption amount. Depending on what your house is worth, its fair market value, and what you owe on your mortgage, you may be able to file for bankruptcy and keep your house if the net proceeds from sale would be under the $30,000 amount after any mortgage would be paid off.

Chapter 13

If after your house were to be sold and mortgage paid off, and you had too much equity in your home, a Chapter 7 discharge will not work for you. In this case, a Chapter 13 bankruptcy will allow you to reorganize your debts and repay them, sometimes pennies on the dollar owed, depending on the circumstances. With an affordable monthly payment on your debts you may be able to pay the mortgage on the home and later refinance if that is a good idea. The Chapter 13 bankruptcy will not change the mortgage terms if you decide to keep the mortgage and home.

Loan Modifications

If you are considering your options with your house and mortgage, some banks are likely to work with you on a loan modification based on the existing values. If the alternative is a bankruptcy and you turn the house over to the bank, the house could end up sitting on the market which is not good for you or the bank, depending on the current real estate market and how much is owed on the home. If a mortgage loan modification helps you keep your home and improve your finances, many bankruptcy attorneys may help you with the application process.

Regardless of which direction you take in bankruptcy, there are several options when you want to keep their home. Some people are tired of homeownership and ongoing expenses and increasing taxes. If that sounds like you, a bankruptcy can also help relieve you from the home and you can rent a house or apartment. Joseph Wrobel has represented all types of people with many different financial circumstances and objectives.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can “Like” the firm’s Facebook page and “Follow” Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.