A chapter 13 bankruptcy is also known as a reorganization bankruptcy, this means your assets will not be liquidated and your debts paid off like in chapter 7. What you will have to do though is get a repayment plan in place and then begin to pay off all your debt as prescribed by the courts. If you have any arrears on your mortgage payments, then you will be given a provision to repay your debts in a new plan. So your home remains with you and your mortgage will also remain, you will have to pay all of it. Read on to know more about chapter 13 and mortgages.
Chapter 13 and mortgages
- Save your home: Your rearranged payment plan will come to play only if you have a steady income flow and can afford to pay off your arrears. Your current income should be able to meet the existing mortgage levels and you need to continue making monthly payments. If you are able to make all your payments till the end of the repayment period, that is normally 3 to 5 years, you are safe from foreclosure. If, however, you do not want your home, you can force the bank to take it back and foreclose. It has to be done as soon as possible or your property will still be in our name and you will be liable for all the other fees and duty that you need to pay as a homeowner.
- The Homestead Exemption: It is a provision that makes it possible for you to reduce the debt you owe that will go to your creditors as part of a repayment plan. Depending on how much equity you’ve racked up on your home, you will be required to pay accordingly, a good portion of it will also reduce your other debts. The state you are in must have the Homestead provision and your home must have a certain amount of equity for this to work.