I'm current on my house mortgage payments but am way in debt for other things. If I file bankruptcy, will they take my house? In Part 1 we discussed what might happen in a Chapter 7 bankruptcy. Today we discuss Chapter 13, the "payment plan" bankruptcy.
As we discussed in Part 1, if your equity in your home is more than the exemption amount for your situation, you may not be able to keep your home in a Chapter 7 bankruptcy. You'll need to consider a Chapter 13.
If you're current on your mortgage payments as in the original question above, a Chapter 13 bankruptcy allows you to keep you house as long as you can show the court that you can afford to do the following things. Then of course you have to actually do those things.
1. Pay into the Chapter 13 monthly payment plan, over three or five years, enough to:
– Pay your "preferred creditors" what you owe (for example, most back taxes).
– Pay your unsecured creditors (credit cards, etc.) at least as much as you would have to pay them in a Chapter 7 bankruptcy.
2. Pay into the Chapter 13 monthly payment plan all of your disposable income (net income less expenses) as shown in your bankruptcy filing. This amount is not in addition to 1 above, but is another requirement for the payment amount that has to be satisfied.
3. Continue to be current on your mortgage payments.
After the end of the payment plan, your unsecured debts will be discharged (eliminated) regardless of how much you're paid on them through the payment plan. And you got to keep your house!
Needless to say, there's more to a Chapter 13 bankruptcy than the quick look here, but this should give you a good idea of whether a Chapter 13 might be valuable for you.
Will they take my house if I file bankruptcy? (Part 1)
Will they take my house if I file bankruptcy? (Part 3)