What Happens to My Mortgage After Bankruptcy?
Bankruptcy | January 7, 2015
Owning a home is a great achievement. Unfortunately, all of the hard work you have put into paying your mortgage may be at risk if you decide to file for bankruptcy in Georgia. What will happen to your mortgage after bankruptcy depends on what actions you choose to take.
How Will You File?
There are two primary ways to file for personal bankruptcy: Chapter 7 and Chapter 13. Each of these has its benefits and drawbacks when you are a homeowner. Chapter 7 is limited to individuals with a certain debt to income ratio, and it is usually pursued by individuals without major property (such as a house) that they wish to keep. Chapter 13 is typically sought out by individuals who have car loans and mortgages they wish to keep. However, you may be able to keep your mortgage with either form of bankruptcy with the proper advice from your Athens bankruptcy attorney.
Can You Reaffirm the Loan?
When you file for bankruptcy, you may have the option to approach your mortgage company with a reaffirmation of the loan, which is a legally binding contract stating that you promise to repay all or a portion of a debt that might otherwise be subject to discharging through bankruptcy. If you do reaffirm the loan, your Morgan & Morgan attorney will need to file specific paperwork with the bankruptcy court.
With a reaffirmed mortgage, you do run some risks if you go into delinquency. Some states allow mortgage lenders to foreclose on delinquent properties and sue property holders with reaffirmed loans for the entire amount of the unpaid mortgage balance. We strongly encourage you to discuss the idea of reaffirming your mortgage with our lawyers before you set yourself up for this personal liability.
If you are already delinquent on your mortgage payments when you seek bankruptcy, it is unlikely that your mortgage lender will allow you to reaffirm the loan.