Bankruptcy Chapter 13 Real Estate

Bankruptcy is often used as the last resort to save your home from foreclosure. However, you can’t use chapter 7 to protect your house as chapter 7 is the liquidation bankruptcy. You can postpone the date of the auction, but filing chapter 7 doesn’t save your home.

When you file for bankruptcy, the court issues an order that prevents creditors from trying to contact you. You won’t get calls from your lender.

However, in due course of time, the court will evaluate your situation. Since the bankruptcy chapter 7 is a liquidation bankruptcy, most likely the trustee will sell your home to pay your creditors. If you don’t want to sell the house, you must assume the mortgage. The bankruptcy application then doesn’t protect your house. As soon as the ban is lifted, the lenders will contact you and might initiate the foreclosure process. If you can’t reinstate your loan, the bank can foreclose your home which worsens the situation.

Compared to bankruptcy chapter 7, the bankruptcy chapter 13 allows you to keep your house. You can use bankruptcy chapter 13 to:

  • Prevent property/car foreclosure
  • Pay your taxes
  • Manage unsecured/credit-card debt
  • Keep valuable non-exempt property

What is Bankruptcy Chapter 13?

It is a repayment plan. You realize that you have accumulated debt and you can’t find a way out on your own. After consulting a financial counselor, you choose to file for bankruptcy chapter 13. Before you send the application, you should create a repayment plan.

You can propose a plan for 3-5 years so you can pay back most of your debts. The maximum length of the program is 60 months.

How much will you pay back to the creditors?

That amount depends on your income resources. After paying for necessities, your disposable income is paid to your creditors. Your unsecured creditors should get at least the amount they would have gotten if you had filed for chapter 7.

Chapter 13 Bankruptcy Eligibility Requirements

You must have some disposable income that can be applied to the repayment plan. If you don’t have a steady income, filing for bankruptcy chapter 7 might be a better option. Other than having a fixed-income source, there are additional requirements:

  • Your unsecured debt must not exceed $394,725.
  • The total amount of your secured debt must be less than $1,184,200.
  • A means test must have been applied.

Can I Keep My House After Filing Bankruptcy Chapter 13 in Connecticut?

Filing bankruptcy chapter 13 will immediately suspend foreclosure proceedings. You can save your home from foreclosure if you can continue to pay the mortgage.

Hopefully, if your income allows, you can continue to make regular mortgage payments. Through the chapter 13 plan, you’ll pay the pending amount. However, you must stay current on mortgage payments. You can’t lose your home through bankruptcy chapter 13, but you can lose your house because of foreclosure. If you want to keep your home, you must stay current and pay the previous installments through the chapter 13 plan.

There is another benefit of chapter 13; it will automatically delete secondary mortgages and the Home Equity Loan. The secondary loans aren’t secured by the title and will be considered unsecured debt. You’ll pay those debts through the chapter 13 plan from your extra income.

For further information, please contact an experienced bankruptcy attorney.

If you’re looking to file bankruptcy to save your home from foreclosure, please contact us first. Our team will study your situation to determine the best possible solution. It is also a must to go through the mandatory credit counseling session before you submit the bankruptcy application.

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