Will I Lose My Home In Bankruptcy?
The short answer to this question is, maybe. There are a few factors that determine whether you can save your home in a Bankruptcy, and they include the following:
1. Whether you are current on your mortgage payment;
2. Whether you can afford to continue making your mortgage payment, and;
3. Whether your home has excess equity.
Whether you are current on your mortgage payment.
If you are eligible for a Chapter 7 Bankruptcy and actually wish to file a Chapter 7, you must be current on your mortgage payments to keep your home. If you are not current on your mortgage payment, you can elect to file a Chapter 13 Bankruptcy, which will allow you to make up your arrearage (the amount of past due payments) over a period of 3-5 years, as opposed to being forced to pay all of the arrearage up front in a Chapter 7 Bankruptcy. In this Chapter 13 reorganization, you will make payments into the Bankruptcy Court to cover your monthly mortgage, your arrearage on the mortgage, your attorney fees, and any other issues involved in your case.
Whether you can afford to continue making your mortgage payment.
As unfortunate as it is, current Bankruptcy Law does not allow for altering the rights of a first-mortgage holder. This means that you are unable to modify the payment due to the holder of your first-mortgage. If you want to stay in your home, you must be able to afford your mortgage payment. The only remedy for saving a home from a foreclosure by the first-mortgage holder is to stretch out the time by which you must pay an arrearage on the home in a Chapter 13 reorganization.
The bright side of Bankruptcy Law, however, does allow you to eliminate or “strip off” a second-mortgage so long as that mortgage is not secured by any equity in the home. In other words, if you owe more on the first-mortgage than the home is actually worth, we may be able to strip off any second or third-mortgages attached to the home and treat them as unsecured debt.
Whether your home has excess equity.
Current law in Indiana allows you to protect $18,700 worth of equity in real-estate for an individual, and $37,400 for a joint-filing. If your home contains more equity than the allowed exemption, you may be forced to surrender your home to the Trustee so that he or she can auction the home in an attempt to satisfy your creditors’ claims. If this is the case and you wish to save your home, you can enter into a Chapter 13 Bankruptcy for the purpose of paying into the Bankruptcy Court the amount of excess equity over a 3-5 year period. This will prevent the Trustee and/or any creditor from seizing your home, and will allow you to maintain your residence there.