If your home is in foreclosure and you are thinking about filing for bankruptcy, you are likely wondering if doing so will help you keep your home. The following are a few other questions to consider, as well: Will you still have to make mortgage payments after you file? Will your mortgage lender be able to foreclose on your home after your file?
Although filing for bankruptcy might be a worthwhile option to buy some more time, it likely won’t be a permanent fix to your foreclosure, unless you continue making mortgage payments. Before making a final decision to declare bankruptcy, understand what will happen to your home after filing under Chapter 7 or Chapter 13 .
What You Need to Know About a Bankruptcy Discharge
When you file for bankruptcy, you do so to obtain a discharge or relief from certain debts. With a Chapter 7, this discharge is usually granted once the time for creditors to object the filing has expired. The average time in this case is four months from the filing date. With a Chapter 13, the discharge is granted after a payment plan has been completed. The average time for Chapter 13 is three to five years. But what about liability for a mortgage debt?
Although a bankruptcy discharge of a mortgage debt eliminates your personal liability to it, a mortgage lender can still foreclose on your home if you fail to make mortgage payments. As a result, a mortgage lender can’t hold you responsible for repaying the deficiency–the difference between the unpaid mortgage debt and the foreclosure selling price) following a foreclosure.
In some states, mortgage lenders have the ability to sue homeowners for this difference and receive a deficiency judgment. However, mortgage lenders can’t receive this judgment if your mortgage debt was discharged in bankruptcy court.
Stephen K. Hachey, a Florida real estate attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.