Bankruptcy and Your Home: Debunking the Myths
Many people who are struggling with debt may consider filing for
bankruptcy as a way to get a fresh start. However, one of the biggest concerns
that they may have is whether they will be able to keep their home after
bankruptcy. There is a common myth that bankruptcy allows you to keep your home
regardless of whether you can afford it or not. This is not true. Bankruptcy
can help you keep your home in some situations, but it is not a guarantee.
Depending on the type of bankruptcy you file, the amount of equity you have in
your home, and your ability to make your mortgage payments, you may lose your
home in bankruptcy or shortly after.
Here are some of the different types of bankruptcy and how they
affect your home if you simply can’t afford it anymore:
- Chapter 7 bankruptcy. This is the most common type
of bankruptcy for individuals. It wipes out most of your unsecured debts,
such as credit cards and medical bills, but it also requires you to
surrender any nonexempt property to a trustee who will sell it and
distribute the proceeds to your creditors. Your home is considered
nonexempt property unless you can protect it with a bankruptcy exemption.
An exemption is a legal rule that allows you to keep a certain amount of
equity in your home from being taken by the trustee. The amount of
exemption varies by state, but it is usually not enough to cover the
entire value of your home. If you have more equity than the exemption
amount, the trustee can sell your home and give you the exempt portion.
Even if you have less equity than the exemption amount, you still must be
current on your mortgage payments and continue making them after
bankruptcy. Otherwise, your lender can foreclose on your home.
- Chapter 13 bankruptcy. This is another type of
bankruptcy for individuals. It allows you to keep your property and repay
some or all of your debts through a court-approved repayment plan that
lasts three to five years. Your home is not at risk of being sold by the
trustee in Chapter 13, but you still have to make your mortgage payments
on time and catch up on any arrears through your plan. If you can’t afford
your mortgage payments or fail to comply with your plan, your lender can
ask the court for permission to foreclose on your home.
- Chapter 11 bankruptcy. This is a type of bankruptcy
for businesses and individuals with large debts or complex finances. It
allows you to reorganize your debts and assets under a court-supervised
plan that may involve selling some property, reducing some debts, or
modifying some contracts. Your home may be affected by Chapter 11
depending on the terms of your plan and the approval of your creditors and
the court. If you can’t afford your mortgage payments or fail to follow
your plan, your lender can seek relief from the court to foreclose on your
home.
As you can see, bankruptcy does not automatically allow you to
keep your home if you can’t afford it anymore. In fact, it may only delay the
inevitable loss of your home if you don’t address the underlying causes of your
financial problems and find a way to make your mortgage payments affordable and
sustainable.
That’s why it’s important to work with an investor agent/broker
along with your attorney if you are considering filing for bankruptcy and want
to keep or sell your home. An investor agent/broker like Azua Real Estate
is a real estate professional who specializes in working with homeowners who
are facing foreclosure, bankruptcy, or other financial difficulties. They can
help you find the best solution for your situation, such as:
- Selling your home quickly for
cash. An
investor agent/broker can help you sell your home fast and hassle-free to
an investor or a cash buyer who is looking for properties like yours. They
can also help you negotiate a fair price and favorable terms, such as
closing costs, contingencies, repairs, and closing date.
- Selling your home through a short
sale. A
short sale is when you sell your home for less than what you owe on your
mortgage, and your lender agrees to accept the sale proceeds as full
payment of your debt. Azua Real Estate can help you obtain
your lender’s approval and cooperation for a short sale, as well as find a
qualified buyer who is willing to purchase your home at a discounted
price.
- Keeping your home through a loan
modification or forbearance agreement. A loan modification is when
you change the terms of your mortgage, such as lowering the interest rate,
extending the repayment period, or reducing the principal balance. A
forbearance agreement is when you temporarily suspend or reduce your
mortgage payments for a certain period. An investor agent/broker can help
you communicate with your lender and negotiate a loan modification or
forbearance agreement that can make your mortgage payments more affordable
and manageable.
Working with an investor agent/broker like Azua Real Estate
along with your attorney is the best solution to avoid postponing the
inevitable loss of your home if you can’t afford it anymore. They can help you
save time, money, and stress, while ensuring that you get the most out of your
home and your bankruptcy. Contact us today and get the help you
need and deserve.