What Happens With Your Home In A Chapter 13 Bankruptcy After Foreclosure Is Filed?

A Chapter 13 bankruptcy filing does not result in your home being taken by the court. However, it is still possible to lose it to foreclosure. If you are facing foreclosure and seeking to file bankruptcy, here is what you need to know. 

What Happens After Filing?

Once you and your bankruptcy attorney file your Chapter 13 with the court, all of your creditors are sent notices alerting them of your action. The notice not only serves to inform the creditors of your attention, but it also stops any legal actions they had planned against you. If you are in the midst of a foreclosure, this means that your home loan lender cannot take your home until the court decides that legal actions can continue. 

This can be a temporary fix to your problem, but it is not permanent. If you are planning to keep your home, it is important that you move quickly. 

What Can You Do?

One of the most important things you need to do is to continue to make payments on your home while waiting for confirmation of your bankruptcy repayment plan. Continuing to or starting to make payments helps to show the court that you are committed to making plans and capable of doing so. It also makes it more likely that your lender is willing to work with you. 

Lenders have the option of reaffirming your mortgage. Reaffirming is a new agreement that involves you paying all or part of your debt to the lender.  Despite what happens with the bankruptcy filing, once you sign the reaffirmation, you are renewing your commitment to the debt. If  you want to keep your home, this could save it. 

What If You Do Not Want the Home?

In the event that you do not want the home and the lender was in the process of foreclosing on it, you can allow the foreclosure to happen. Even though you are giving up the home, you still need to take action to protect yourself from a deficiency judgment. 

A deficiency judgment occurs when the lender sells the home after foreclosure for an amount that is less than what was owed on your loan. The difference between what you owed and what it sells for is the deficiency and you could be legally responsible for paying it off despite your bankruptcy. To protect yourself from it, your attorney can ask that the judgment be included in your bankruptcy. If it is, once you pay off your other debts, the deficiency can be discharged. 

There are many other considerations that your attorney (like those at Wade Bettis, J.D., Ph.D., PC) can help you assess. Talk with an attorney as soon as possible to explore all of your available options.