Ohio homeowners who are struggling with serious financial challenges may understandably be considering filing for bankruptcy. The debt relief that may be achieved through a bankruptcy filing has helped countless people move forward passed their debts and develop stronger financial futures. However, for those people who own homes, it is important to understand how a mortgage factors into the bankruptcy equation.
As Quicken Loans explains, people who file for Chapter 7 bankruptcies may be forced to let their homes go back to the banks if the home is considered nonexempt. This means it does not meet the criteria for the value amount under which debtors are allowed to keep assets. The option to keep a home here is to pay the full mortgage value in cash. Given that when filing for bankruptcy, finances are generally tight, this is not often a viable option for most people
When keeping a home is a priority for a consumer, Bankrate suggests that a Chapter 13 bankruptcy plan may be the better bet. This structured repayment of debt allows people time to get current with mortgages while working through a bankruptcy plan.
A mortgage is not included in a bankruptcy plan so consumers must make all mortgage payments in addition to making their monthly trustee payments. If a past due balance is in existence on the mortgage, homeowners will need to work with lenders to get current on this during the course of the bankruptcy. Upon filing for Chapter 13, collection efforts are put on hold via what is called an automatic stay to start the process whereby consumers can get back on track with payments.