Posts Tagged ‘bankruptcy mortgage’

Will You Lose Your Home If You Claim Bankruptcy?

Many people fear to claim bankruptcy even if it is the most suitable option for them. They actually fear that they will lose their home if they use this option. Well, it doesn’t happen always, but it is also true that there is no straightforward answer to this question. There are several factors that are taken into account in this regard.

Laws under Different Chapters

In usual circumstances, chapter 13 allows you to keep your home, especially if the court is convinced that you can make the repayment of the mortgage without making further defaults once the repayment terms are restructured. Even chapter 7 may allow you to keep your home, as when it comes to deciding about exemptions, the laws vary from one state to another. In general, if the equity in your home is exempted and if you have the ability to pay the monthly payments, you may save your home.

Circumstances When You Should Willingly Give Up Your House

If you are going to claim bankruptcy, you may come across circumstances when you may like to give up your house willingly. For example, a common situation is when the total liability on you is more than the current market value of your home. In such cases, it does not make much sense to keep your home. Paying more money to your creditors than your house is worth is like financial bleeding, which you must stop as early as possible. However, sometimes, you may still want to keep your home. After all, you need a place to live in. if you do not have an alternate solution, you will be in a deep trouble. Therefore, it is important for you to look into each and every aspect before you make a final decision in this regard.

Can Short Sale be a Better Alternative to Bankruptcy?

If there is no way you can keep your home, you probably will not like to claim bankruptcy at all. There can be several better alternatives that you can try in this regard. For example, some people find short sale a much better alternative to bankruptcy. Short sale refers to the process where you sell your home at a lower price than the amount of money you owe to the mortgage lender; you can do this in complete settlement of the loan. If you owe $400k on mortgage but the current value of your home is only $350k, the lender may agree to accept a short sale where they will keep $350k in settlement of $400k; they will show the $50 deviation as loss on their bookkeeping records.

Overall, the only way you can keep your home even if you are going to claim bankruptcy is when you are willing to make the payments even after getting bankrupt. You must look into each and every aspect thoroughly before you choose your options in this regard.

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