Archive for the ‘Will I Lose My House?’ Category

Will I automatically lose my house if I file bankruptcy?

Saturday, February 13th, 2010

People often fear that they will automatically lose their house if they file bankruptcy and put off talking with a bankruptcy lawyer for that reason.   This is a false notion.  A debtor should keep in mind that each person’s situation is different and should be comprehensively reviewed to determine whether they will be able to maintain ownership of their home after filing bankruptcy.  In some situations the mortgage company may require the homeowner to reaffirm the mortgage and/or other related liens on their property.  Other options, such as a Chapter 13 to cure mortgage defaults, may also be possible.  Additionally, if an eligible  homeowner is able to get debt relief  by discharging those debts that are dischargeable, it may make it easier for him or her to make the monthly mortgage payment.  In any case, homeowners should not fear considering bankruptcy; nor should they put off talking to a knowledgeable bankruptcy lawyer,  but rather seek out an experienced bankruptcy lawyer to aid in evaluating their situation.  The sooner the homeowner has his or her situation evaluated by a knowledgeable and experienced bankruptcy attorney, the sooner the homeowner will be able take the steps necessary to achieve a better financial future.  Waiting too long to consult with an experienced and knowledgeable bankruptcy lawyer may limit the options available to the homeowner.  For instance, by waiting too long, the mortgage default may get so large that it cannot be cured through a Chapter 13 plan.  Some people may be tempted to take a loan against exempt assets, such as their 401K, in order to pay down debt and/or try to catch-up on missed mortgage payments.  This generally compounds the problem as the 401K loan must be paid back or the debtor may suffer from penalties for early withdrawal as well as having to pay taxes on the amount borrowed from the 401K.  Additionally, the addition of the 401K payments to the over-all debt load often pushes the homeowner into using his or her credit cards to supplement the loss of disposable income due to the added 401K payments.  A timely filed bankruptcy might save both the home and the 401K funds.  By filing a Chapter 13, an eligible debtor may be able to save his or her home by curing the mortgage default and restructure the unsecured debt through the Chapter 13 plan rather than borrowing from or liquidating his or her 401K plan.  A debtor eligible to file a Chapter 7 may be able to discharge the dischargeable debt that is making it difficult to meet the monthly mortgage obligation and avoid falling behind on the mortgage payments in the first place and preserve his or her 401K funds for retirement.

We are a debt relief agency.  We help people file for relief under the Bankruptcy Code.