If Current on All of Your Home Obligations
A Chapter 7 “straight bankruptcy” is generally designed for more straightforward debt situations, including involving debts on your home. If you are current on all obligations secured by your home, and you intend to keep the home and keep up on your mortgage payments, your home and your mortgage will very likely proceed through a Chapter 7 case smoothly without any change.
This means that you are not only current on your mortgage (and any second or third mortgages), but also on the real property taxes and any homeowner association dues, and that you have no income tax liens or other obligations encumbering the title to your home. If you have problems with any of these, Chapter 13 “adjustment of debts” may be a better solution.
If Not Current on Your Mortgage But Not Too Far Behind
If these other home debt issues don’t apply to you but you ARE a few months behind on your mortgage, you may still be able to file a Chapter 7 case. Generally your mortgage lender will require you to catch up on your arrearage, often by making your regular monthly payments PLUS enough extra each month to pay off the arrearage within a certain length of time, often no more than a year or so. You and your attorney need to look closely at your budget to see how much you could afford to pay monthly towards that arrearage after no longer paying the debts that you would be discharging (legally writing off) in your Chapter 7 case.
Considering the upheaval in the residential mortgage world of the past decade, what exactly your lender will allow is difficult to generalize about. You may even qualify for a loan modification, wrapping the arrearage into the new modified loan so that you don’t have to pay the accrued arrearage, just the new mortgage payments. Your attorney, who deals with mortgage lenders about such matters every day, will advise you about your options.
If you are not able to catch up on the mortgage within the time required by your lender, a Chapter 13 case can usually buy you much more time to do so, up to 5 years.
If You Have a Judgment Lien Against Your Home
Chapter 7 is quite limited in how it can help deal with debts that are liens against your home’s title. So if you are behind on property taxes or homeowner association dues, have an income tax or child support lien, or a lien arising from a dispute with construction contractor for home repairs or renovation, and you want to keep your home, there’s a good chance that Chapter 13 would be a better way to address these.
However, if there is a judgment against you, which has turned into a lien against your home by the creditor filing that judgment, that judgment lien may well be able to be “avoided,” erased, under Chapter 7. Certain conditions must be met, including that the home must qualify as your homestead. Be sure to tell your attorney about this right when you meet him or her in order to determine that the judgment lien is against real property that is really your homestead under Texas law, and to see if the other conditions have been met.
If you live in the Dallas-Fort Worth Metroplex, call me to determine if Chapter 7 is right for you regarding your mortgage(s), other home related debts, and all your other debts. I am Carrie Weir, a Texas bankruptcy attorney serving the Metroplex, especially the area around Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, and Rowlett. Please contact me for a free and confidential consultation, so that you can make an informed choice about your home and the rest of your finances. Call 972-772-3083 or use the contact form here. I look forward to helping you. Thank you.
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