Bankruptcy Court May Grant Discharge of Mortgage Debt After Multiple Missed Payments
As a general rule, consumers can discharge debt through a Chapter 7 bankruptcy filing or reorganize their debts under Chapter 13. Under the CARES Act, enacted into law on December 21, 2020, the Bankruptcy Court now has the discretion to discharge certain mortgage debt for individuals in Chapter 13 bankruptcy proceedings. Here’s how it works:
Discharging Mortgage Debt Due to COVID-19
The CARES Act gives bankruptcy judges temporary authority to discharge mortgage obligations if the mortgagor (person owing the debt) defaulted on three or fewer residential mortgage payments between March 2020 and December 27, 2021. There is a caveat, however. To obtain the discharge, the debtor must provide evidence that a COVID-19 hardship directly or indirectly led to the default. The statute does not indicate what constitutes sufficient proof, but legal experts expect the standard to be highly flexible, given the nature and persistence of the pandemic.
Homeowners in Chapter 13 must understand, though, that any discharge granted by the bankruptcy court will have a limited effect. While it will permanently relieve the homeowner of the obligation to make the missed mortgage payments, it won’t have any impact on post-discharge state law remedies available to banks and mortgage companies. For example, it won’t suspend foreclosure proceedings, and it won’t have any impact on liens against the property. It will, however, allow you to walk away from a mortgage without any further obligation.
Contact an Experienced Rockwall, Texas, Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. I am currently communicating with clients by phone, text message, or videoconference. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.
Speak Your Mind