Can You File For Mortgage Bankruptcy?

In view of the very difficult housing market in the US and many countries worldwide, it is becoming apparent that many homeowners are starting to really struggle to keep on top of their commitments in relation to paying their monthly mortgage repayments. It is often the case, that a persons home and other possessions, can be included if it becomes a requirement to file for bankruptcy proceedings.

If a homeowner is really finding it difficult to make ends meet to cover financial obligations, including making the mortgage payments, then it might be necessary to file for bankruptcy as an only means to help in regaining control over this very serious and stressful problem. It is the case that it is possible to file for bankruptcy on a main home or residence; although it is generally a quite complex procedure should you wish to take this course of action.

Here is a general overview of the nearest options available in this matter -

As soon as a bankruptcy petition is officially filed, the first thing that happens is that a form of legal protection is put in place which is referred to as the automatic stay. With the petition filed with the local courts, the automatic stay is in place to stop any potential creditors from trying to proceed with any action to recover debts that might be due to them. This can relate to repossession, property foreclosure, and wage garnishment. In order to protect the person that filed the petition the automatic stay will remain in place throughout the length of the case.

If you decide that it will benefit you to go with a chapter 13 bankruptcy, it is likely that your case will remain active for a period of up to 5 years whilst you continue to make repayments at various amounts which have been agreed on in discussions with the bankruptcy courts and the individual creditors concerned.

A key feature throughout this repayment period, is that the automatic stay will remain in place and that will stop a mortgage company or bank from making any attempts to foreclose on your property, which essentially means that you are able to buy yourself a considerable amount of time in order to try and help with recovering from your financial difficulties.

A bankruptcy proceeding often includes a repayment plan which lasts in the general from 3 to 5 years, and throughout that period it should be the attempt to catch up on missed mortgage repayments, whilst also making sure to keep on top of all future payments as and when they fall due.

If a person decides to file for bankruptcy, this is unlikely to make any difference to the existing mortgage repayment terms or conditions with the bank or similar institution. A bankruptcy courts isn't able to act in any way that would modify the conditions of an existing mortgage deal, but with proceeding with the bankruptcy, the person does of course have the extra time in which it might be possible to catch up on all the defaulted payments.

An alternative form of bankruptcy refers to chapters 7, which in this case it wouldn't be a requirement to abide by a strict repayment plan, instead would be able to effectively discharge the debts which are unsecured. It is often the case that being able to file for chapter 7-bankruptcy is dependent on the particular laws of the state that you live in, as this can vary across the country.

Is it possible to attempt to file bankruptcy proceedings solely on a home?

A further point to consider might relate to how severe the loans are and which ones are currently being defaulted on. If a person is pretty much up-to-date on all financial obligations, except for the mortgage then someone might look at the viability of filing bankruptcy on just that single debt.

But, unfortunately this isn't possible as it isn’t permitted for bankruptcy proceedings to be issued on a sole entity. If it becomes apparent that it will be necessary to choose bankruptcy as a means of recovering from a debt burden, then it will be necessary to include all debts in the proceedings.

It is however important to consider that certain debts, such as those which might relate to child support or student loans, aren't generally discharged if wishing to proceed with bankruptcy. Although it will be necessary to declare these financial obligations to the court as they do require a clear and accurate image of a person’s debt related matters.

All in all, if you are looking at the viability of filing for bankruptcy, you need to look into this matter and also take financial advice to ensure that you take the most appropriate measures for your individual circumstances.


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