When you file bankruptcy, treatment of your home loan debt depends upon whether you file a Chapter 7 or Chapter 13 bankruptcy. This is because in a liquidation case, such as Chapter 7, you don't get an opportunity to repay missed mortgage payments. If you are behind on your loan, your lender can foreclose. In a repayment case, such as Chapter 13, you have the option of repaying your missed mortgage payments over time, and by electing to do so, your lender is barred from foreclosing in your property for so long as you comply with your Chapter 13 plan or reorganization.
A home represents the American dream. It is a prized and cherished asset that most of us do not want to give up. If you have a home loan and are contemplating bankruptcy, it is likely important to you that you keep your home. An experienced lawyer can help you file bankruptcy on a home loan San Diego and still keep your property.
When you file bankruptcy, home loan debt is treated different depending upon whether you file under Chapter 7 vs. Chapter 13. For the most part, if you file under Chapter 7, home loans are treated just as if you did not file bankruptcy. If you file under Chapter 13, you can cure (bring current) any home loans and you may even be able to eliminate a 2nd mortgage depending upon your circumstances.
If you file under Chapter 7, any home loans and home debt are, for the most part, treated the same was as if you had never filed bankruptcy.
If you are current on your mortgage loan payments, then the general rule is that as long as you stay current on your payments, you will keep your home in bankruptcy.
If you are behind on your mortgage loan payments, or if you fall behind, your lender can and will foreclose on your home if it wants to foreclose. In San Diego, most lenders will start the foreclosure process after 2-3 months of late payments. Despite that your bankruptcy filing creates a bankruptcy stay that stops the foreclosure process, if you file under Chapter 7 and you are behind on your payments your lender can obtain relief from the stay, which means it asks the court to allow foreclosure notwithstanding that you filed bankruptcy. In San Diego, by local court practice and procedure, this happens very fast, in as little as 1 and 1/2 months. The motions are routinely granted, however your lawyer may be able to obtain an Adequate Protection Order (APO) under which you can still keep your property and repay the missed payments under the APO.
In some cases, if you file under Chapter 7 and you are behind on your payments, your lender may allow you to do a short sale of your property or may approve a loan modification. However, this is totally discretionary with your lender, meaning that if your lender does not want to work with you and wants to foreclose, it can. There is nothing that your attorney can do to force the short sale or loan modification if your lender doesn't want to voluntarily do it. Of course, this all assumes you are in a Chapter 7 case. By filing a Chapter 13 case, your lawyer can actually force a modification, actually a complete elimination, of your 2nd mortgage.
If you file under Chapter 13, you can repay your missed mortgage payments, bring your home loans current, and thereby save your home from a pending foreclosure.
If you want to keep a home in bankruptcy San Diego, then in your Chapter 13 case you must repay all of your missed mortgage payments over a 3-5 year period. You do this by having your lawyer propose a Chapter 13 plan in which you make monthly payments to the San Diego bankruptcy trustee. The bankruptcy trustee in turn will take the payments and distribute them to your home loan lender for the duration of your Chapter 13 case.
If you want to let the home go, you can stop making payments and surrender your house. You do this by having your attorney draft a Chapter 13 plan that surrenders the property. Assuming that you otherwise qualify for elimination of your home loans in your Chapter 13 case, the mortgage loan debt will be eliminated.
What is more, in a Chapter 13 you may be able to eliminate a 2nd mortgage, in which case you can keep your home without having to repay the missed payments, or the future payments, on your 2nd mortgage. You just make the payments on your 1st mortgage, as well as any missed payments on the 1st mortgage, and the 2nd mortgage loan debt is wiped out.