Is Filing for Mortgage Bankruptcy an Option?

Mortgage After Bankruptcy: Can You Get It? | Chase

Have you fallen behind on your mortgage payments? Are you worried about losing your home or receiving constant calls from creditors? If so, you’re not alone. Since 2008, many homeowners have faced foreclosure after struggling to keep up with monthly payments, particularly those who purchased homes with alternative mortgages like 0% down or adjustable-rate mortgages.

If you are now unable to keep up with your mortgage payments, there are a few options available to you.

Can You File for Bankruptcy on Your Mortgage Alone?

If you’re behind on your mortgage payments but not on your other debts, you cannot file for mortgage bankruptcy alone. Similarly, if you’re behind on your second mortgage but current on your first, you cannot file for bankruptcy solely on the second mortgage.

When filing for bankruptcy, all your debts must be included, and creditors will no longer be able to contact you regarding repayment. In a Chapter 7 bankruptcy, you would lose your home as it would be liquidated to cover your debts. If you can afford to make payments, Chapter 13 bankruptcy might be a better option as it allows you to keep your home, retirement savings, and other assets.

What Other Alternatives Are There to Filing Bankruptcy?

If your primary reason for considering bankruptcy is your mortgage, there are other options to explore:

  1. Apply for a Mortgage Modification: Many Americans have managed to stay in their homes through loan modifications. You can apply for a loan modification whether you’re current on payments, behind, in foreclosure, or filing for bankruptcy. Banks often prefer to negotiate a mortgage modification rather than face the costs and time associated with foreclosure.
  2. Utilize Equity in Your First Mortgage: If you’re current on your first mortgage but behind on your second, you may be able to use equity in your home to refinance. The funds from the first mortgage can help you catch up on the second mortgage payments.
  3. Temporarily Stop Making Payments: If you need temporary financial relief, you can stop making payments for a short period. While the bank will eventually start the foreclosure process, in some states, making a payment resets the foreclosure timeline. This strategy carries risks, including the potential loss of your home, and some consider it unethical.

If you’re behind on your mortgage and considering bankruptcy, remember there are alternatives. Often, the best course of action is to contact your bank, explain your situation, and see if they’re willing to work with you. This approach can help you avoid the drastic step of filing for Chapter 13 or Chapter 7 bankruptcy.

Leave a Reply

Your email address will not be published.