In this Part 3 of the series "Will they take my house if I file bankruptcy?", the situation is that you're behind on your house mortgage payments, afraid they'll foreclose on your house, and probably in debt for other things. In this situation the question is better expressed as "Can I save my house by filing bankruptcy?". As with many questions about bankruptcy, the direct answer is a strong "it depends".
First, filing any type of bankruptcy will stop a pending foreclosure but the question then becomes "For how long?".
In a Chapter 7 bankruptcy, you'd have to pay all of the back (unpaid) mortgage payments quickly or the lender could get the court to allow them to foreclose. If you could pay all the back mortgage payments you wouldn't be in this situation in the first place, so Chapter 7 isn't a solution.
In a Chapter 13 bankruptcy you're allowed to pay the back mortgage payments over the life of a monthly payment plan of three to five years. That makes Chapter 13 bankruptcy the one to look at.
If you can afford to pay off those back mortgage payments monthly as described above, make all your current mortgage payments as they come due, and pay some additional amount monthly into the Chapter 13 payment plan, then you can save your house from foreclosure.
There's one more "helper" available in a Chapter 13 bankruptcy. If your house is not worth more than the amount owed on the first mortgage, then you may be able to remove ("strip") the lien on your house from the second mortgage loan in a Chapter 13, turning that second mortgage debt into an unsecured debt (like credit card debt) that gets paid (possibly only in part) along with other unsecured debts in the Chapter 13 payment plan. That would make one less monthly payment to make to keep your home.
How much would you have to pay each month into the Chapter 13 plan? That's beyond the scope of this article and depends on your entire financial situation. This is definitely one of those "don't try this at home" things. You need to discuss your situation with a qualified bankruptcy attorney in your area.
Will they take my house if I file bankruptcy? (Part 1)
Will they take my house if I file bankruptcy? (Part 2)
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2 thoughts on “Will they take my house if I file bankruptcy? (Part 3)”
My mother who is a senior believes she needs to file BK. She lost her home (CA) about 5-6 years ago due to fraud. (Mortgage Broker was taking out loans and she was not aware.) The broker was supposed to have refinanced the home once and pay off debt. She is now being contacted by the creditors stating that they were not paid off. She receives social security and child support. And works part time. She does own a home in another state that is paid off but not occupied due to repairs that it needs. Worth approx. $25,000.00. Do you have a suggestion for what chapter she should file AND if she would lose her home in another state? My mother resides in the state of CA.
Tisha, the short answer is that your mother's paid-off house is an asset of hers like any other asset. Therefore if she files a Chapter 7 bankruptcy (the one that gets rid of your debts quickly), that house needs to be "exempted" to keep from losing it to pay her creditors. In California, if you don't need to protect equity in your home, you get a "wildcard" exemption of $26,925 for use on any items or items. So that would have to cover her house, bank accounts, stocks (not retirement accounts), etc. There are other exemptions for specific items. If your mother is interested in filing bankruptcy, she should consult with an experienced bankruptcy attorney in her area so she can have her entire situation analyzed.