Mortgage Troubles and Bankruptcy

Dealing with mortgage debt is a scary time, especially once the threat of foreclosure becomes real. For many families struggling to maintain their house payment and other debts, filing for bankruptcy may be a good solution.

Chapter 13

Mortgage debts are best resolved in Chapter 13 bankruptcy. The reason is that mortgages are secured debts, meaning the loan is secured against an asset. The asset  can be seized and liquidated by the lender in the event of default on the loan. This  means that in order to keep the asset (i.e. the home) you must maintain payments. Unlike Chapter 7, filing for Chapter 13 allows you to develop a payment plan to resolve your missed mortgage payments and get caught up.

In some cases, Chapter 13 can even help you resolve second mortgage debts. However, there are some conditions for this to be possible. Typically, the home must valued less than what is currently owed on a first mortgage. Also, the second mortgage debt must be unsecured, meaning it does not possess the right to liquidate the property. In this case, the second mortgage debt would be stripped off and treated as any other unsecured debt, like credit cards.

The foreclosure process can be tricky and filing for bankruptcy isn’t for everyone. If you are considering filing for Chapter 13 to resolve your mortgage debts, it is best to consult with a Dallas bankruptcy attorney about your situation.