How does bankruptcy impact your homeownership
No one has ever wished to file bankruptcy. However, sometimes you may need to file it if you do have any other alternative. The most crucial thing is to understand your options and how they will affect your existing mortgage or future ability to secure home loan financing. The best way to get access to this information is to talk to an attorney. Contact Philadelphia foreclosure lawyer, and you will get all the advice you need before making any decision.
You should also understand the two different types of bankruptcy; Chapter 7 and Chapter 13. Chapter 7 bankruptcy wipes out many or all your debts. This option may even force you to sell or liquidate some of your property so that you can pay back some debt. Chapter 13 is like a repayment plan. Chapter 13 allows you to create an arrangement with the bankruptcy court on how you will repay those you owe. Depending on what you can afford, chapter 13 may pay some debts in full. Read on to discover how bankruptcy impacts your homeownership.
- Chapter 7. With Chapter 7, the law will either deem your existing property exempt or nonexempt. Exempt means that you will keep your home throughout the entire process. Nonexempt means that you will either surrender your home or pay its value in cash. These options depend on your bankruptcy trustee and how they choose to handle your case. When you file for Chapter 7, you do have to pay your mortgage. However, your lender still has the right to your home if the debt is not cleared. As such, you may lose your property if the lender enforces the lien on your home.
- Getting another Mortgage after Chapter 7. Most lenders will not finance you until two years after Chapter 7 has been discharged. In case you find a lender, who will consider you for financing before two years, ensure you understand all the terms and conditions included in your mortgage.
- Chapter 13. If you decide to file for Chapter 13, you will not lose your home. However, in your repayment plan, you will have to include details on how you will continue paying the loan. In most cases, your bankruptcy trustee will issue an automatic stay. An automatic stay prevents creditors from any collection efforts. Automatic stay temporarily halts foreclosure and repossession of your property regardless of the stage of the foreclosure process.
- Getting another Mortgage after Chapter 13. With chapter 13, most lenders will only consider your mortgage application one year after Chapter 13 has been discharged. Nevertheless, they make some exceptions for USA veterans. If a lender agrees to consider your request before the one year is over, ensure you read and understand all the terms and conditions in your mortgage.
Filing for bankruptcy is a decision that will impact both your current and future financing. If you want to take this road, ensure you first discuss your options with a financial advisor or a lawyer.