While lawyers and judges are the ultimate legal experts, of course, I believe that every citizen should take the time to learn a little about law for several reasons. First, it is important to know your rights, and knowing them can come in handy if anyone ever accuses you of a crime you didn't commit or threatens you legally in another other way. Second, learning about your local, state, and federal laws can help you act as a better citizen. When election time comes around, you can then truly understand ever change in law being proposed by a candidate and whether it benefits society or not. I plan to share posts about law topics explained in plain English on my new blog, so you can come back often to sharpen your legal knowledge!
If you've begun to fall behind on your regular bills, and fear that you'll never be able to catch up, you may be considering filing for bankruptcy protection with the help of a site like http://wfactorlaw.com. However, you likely also want to help reorganize your finances while creating a minimal disruption to your everyday life. You may be concerned that filing bankruptcy will cause you to lose your home. There's no need to let these fears prevent you from filing -- in general, you'll be allowed to keep your home, even after filing for bankruptcy. Read on to learn more about how your home is treated after you've filed for Chapter 13 bankruptcy protection, as well as whether you'll be able to qualify for future mortgages.
What is the difference between Chapter 13 and Chapter 7?
The term "bankruptcy" can be used to refer to Chapter 7, Chapter 11, or Chapter 13 bankruptcy. These are named for the chapters of the bankruptcy code in which they are found, and offer very different options for the discharge and reorganization of debt.
Even if you otherwise qualify for a Chapter 7 bankruptcy, you may choose to go with a Chapter 13 bankruptcy instead, particularly if your debt level is relatively low. If you don't adhere to the Chapter 13 payment plan, this plan will then convert to a Chapter 7 discharge.
How is your home treated in a Chapter 13 bankruptcy?
Because your mortgage (along with any second mortgage or home equity loan or line of credit) is secured with your home's equity, this claim is given priority over other unsecured claims, like credit card debt. In general, the Chapter 13 payment plan put forth by the bankruptcy trustee will include the full value of your mortgage -- ensuring that you remain in good standing with your mortgage company during the duration of your bankruptcy.
If you owe more on your home than it is worth, you may opt to let it go during the bankruptcy. In this case, the excess amount owed becomes an unsecured claim, and your lender goes to the back of the line to collect. For this reason, it is in your lender's best interest for you to remain in your home.
Will you be able to apply for mortgages in the future?
The good news is that -- whether you give up your home voluntarily or it is sold at a foreclosure or bankruptcy sale -- you'll be able to apply for a new mortgage fairly quickly. In some cases, with FHA and other types of mortgages backed by the federal government, you can even receive a new mortgage while you're still in the bankruptcy process. In other cases, you must wait one to two years before applying for a new mortgage.