For many, the most nerve-wracking part of filing for bankruptcy is wondering what will happen to their home. For many, a home is so much more than shelter, as it’s the place where you build memories with your loved ones. As such, many are hesitant to file for bankruptcy because of how it can impact their ability to remain in the home. If you’ve considered bankruptcy, it’s important to understand the impact this process can have on your mortgage payment. The following blog explores what you must know and why connecting with a Memphis, TN bankruptcy attorney is critical to exploring your legal options.
How Does Bankruptcy Impact a Mortgage Payment?
How bankruptcy will impact your mortgage depends heavily on what kind of bankruptcy you will file for. Chapter 7 bankruptcy is much faster, as it involves the liquidation of your assets. In general, this option is ideal for those who have a considerable amount of unsecured debts they would like to have discharged, as this can help you stay on top of your mortgage payments. However, if you are behind on your mortgage payments and have too much equity in your home, it can be seized during bankruptcy.
If you pursue Chapter 13, your debts will be consolidated into one payment, which the trustee will then distribute to each creditor. Your mortgage, since it’s a secured debt, will be included in this payment amount. Generally, when you file for Chapter 13, the entirety of your payment will be included when reorganizing your debts.
Is It Possible to Reduce the Mortgage Amount?
If you are in Chapter 13 bankruptcy, it may be possible to reduce your mortgage amount. However, this is an incredibly complicated and confusing process, so you should connect with an experienced attorney who can help you through this process. If you want to reduce your mortgage, you’ll need to prove that it’s unsecured by showing you owe more on the mortgage than the home is worth.
You may also look to reduce your mortgage loan so the payments are easier to manage. Generally, you may be able to work with your creditor to renegotiate the mortgage loan terms so you can stay on top of payments. This is ideal as it will allow you to continue making payments without falling behind and potentially losing your home. However, you should not try to negotiate these matters on your own, as it can result in an unfavorable outcome.
When going through the bankruptcy process, it’s in your best interest to connect with an experienced attorney from the Arnold Law Firm as soon as possible. Our team understands how difficult these matters can be to navigate which is why we will do everything possible to guide you during these times. Connect with us today to learn how we can fight for you.
