With foreclosure reaching very high
rates, one of the most common questions from clients is the question of whether
or not they will lose their homes if bankruptcy is filed? Some homeowners want to get rid of their
credit card debts but are under the impression that the filing of a bankruptcy
case will not only eliminate their credit card debts but will also result in
the loss of their homes.
Whether or
not you can keep your house after filing for bankruptcy depends on several
factors. It would depend on whether or
not you have equity in the house. It depends whether or not you are current on
your mortgage payments. It would also depend whether you are filing for a
Chapter 7 or a Chapter 13 bankruptcy.
If the
debtor has no equity in the house then bankruptcy trustee will have no interest
in taking the property from you. This means that you can keep your home and
continue to stay in it as long as you continue to pay the mortgage payments on
the house to the lender. Lenders are in
the business of loaning you money and collecting interest from the loan. This
is how Lenders earn their profits. They are not in the business of foreclosing
your houses. Hence, as long as you keep on paying your mortgage you can keep
your house regardless of the bankruptcy filing.
If you are
current on your mortgage, a Chapter 7 bankruptcy filing allows you to continue
to keep your house while eliminating your unsecured debts such as credit cards
obligations and medical bills. However, if you are no longer current on your
mortgage payments, the filing of a bankruptcy case may temporarily halt the
foreclosure of your house. Note that the operative word is “temporarily”. Eventually, you will lose your house
regardless of the filing of a bankruptcy petition if you do not pay your
mortgage obligations.
On the
other hand, if you are already behind in your mortgage payments and you want to
keep your house, then you may have to file for a Chapter 13 bankruptcy. The
chapter13 bankruptcy allows you to catch up and pay the overdue arrears on your
mortgage over a 3 to 5 year period of time.
In most
cases, homeowners who want to keep their houses and have financial capacity
will be able to keep their homes even when undergoing bankruptcy. It’s just a
matter of knowing what protections the law provide and what the homeowner’s
available options are.
(DISCLAIMER:
material presented above is intended for informational purposes only. It is not
intended as professional advice and should not be construed as such. Rey
Tancinco is a partner at Tancinco Law Offices, a professional corporation with
offices in San Francisco, Vallejo, and Manila. The law office website is at:
tancinco.weareph.com/old. Rey Tancinco can be
contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com.)
