will a mortgage note do when filing bankruptcy on home for a lawyer

The bank cannot take a house if the mortgage is current. The credit report will show the mortgage involved in a bankruptcy case by a joint debtor on the mortgage and the bank will stop sending statements during the bankruptcy but if payments are made regularly then no problem with the house. It will just be an inconvenience for about four months.

Full Answer

What happens to my mortgage if I file bankruptcy?

It is important to note that the filing of a bankruptcy technically discharges the debt (mortgage); however, unless you are planning to surrender the property in bankruptcy, you will need to continue to make mortgage payments. Unlike reaffirmations for car loans, mortgage debt is very rarely reaffirmed in bankruptcy.

How is my home handled in a bankruptcy?

How your home is handled in a bankruptcy is determined by state or federal homestead exemptions. While specifics will vary by state, here’s how the exemption works.

Should I reaffirm my mortgage after filing bankruptcy?

In some states, reaffirming a mortgage is routine and judges gladly approve the agreements. In others, judges can dress down bankruptcy lawyers for even floating the idea. New Jersey and New York are examples. In such states, no attorney would prepare much less file a reaffirmation agreement destined to be rejected by the court.

Can my mortgage company Raise my interest rate after bankruptcy?

The good news is that your mortgage company cannot raise your interest rate or change other terms of your loan to punish you for filing bankruptcy. The bad news is that some homeowners filing for Chapter 7 bankruptcy will lose their homes.

When you file bankruptcy What happens to your house?

After filing for Chapter 7, your property will go into a bankruptcy estate held by the Chapter 7 bankruptcy trustee appointed to your case. However, you don't lose everything because you can "exempt" or remove property reasonably necessary to maintain a home and employment.

Do people come to your house when you file bankruptcy?

If you and the trustee agree that the assets are property of the estate, the trustee or the trustee's representative might come to your house to collect those assets at an agreed-upon time. It's also possible that the trustee would request that you deliver the items.

Can a mortgage be discharged in bankruptcy?

Mortgage debts, and other secured debts–such as those on vehicles–are also dischargeable in bankruptcy in most cases. This means that the obligation to pay on the underlying mortgage (or other secured) debt is extinguished if you receive a discharge in bankruptcy.

Do you have to pay mortgage after bankruptcy?

In most cases, a mortgage lender's lien (and right to foreclose on your house) survives bankruptcy. This means that if you want to keep your home, you must pay your mortgage during and after bankruptcy.

What do bankruptcy trustees look for?

In addition to making sure that your paperwork is accurate and complete, the trustee will be on the lookout for omitted or undervalued assets, undisclosed income, fraudulently transferred property, and any other red flags that can benefit your creditors or indicate abuse of the bankruptcy process.

What do you lose when you file bankruptcy?

Filing Chapter 7 bankruptcy wipes out most types of debt, including credit card debt, medical bills, and personal loans. Your obligation to pay these types of unsecured debt is eliminated when the bankruptcy court grants you a bankruptcy discharge.

Is it better to file for bankruptcy before or after foreclosure?

You'll most likely gain more if you file for bankruptcy before your home is foreclosed. For one thing, you'll prevent the lender from getting a deficiency judgment if one is allowed in your situation. You'll also get to stay in your house longer than if you let the foreclosure happen and later file bankruptcy.

Can you have an 800 credit score with a bankruptcy?

Many people are afraid of what bankruptcy will do to their credit score. Bankruptcy does hurt credit scores for a time, but so does accumulating debt....Bankruptcy Affects High Credit Scores More Than Low Credit Scores.ScoreAverage Drop in Credit ScoreExcellent (850-800)200 pointsVery Good (740-799)200 points3 more rows•Jun 30, 2021

What is a lien on a property?

They need help of buying a property with a mortgage. This mortgage is a lien against the property. The lien allows the mortgage company to take back the property if the terms of the loan are not followed. It also requires that the mortgage loan be paid back in full if the property is ever sold or transferred.

What is foreclosure against only the property?

A foreclosure against only the property , also referred to as an in rem proceeding. If you reaffirm a mortgage during your bankruptcy, then all obligations for the mortgage return. The mortgage company can come after the debtor for any unsatisfied obligation.

How long does it take to pay back a mortgage with Chapter 13?

A Chapter 13 would allow a debtor to pay back arrearages over the course of 3 to 5 years. While paying back the arrearage, you must also continue to make your regular payments to the mortgage company.

Why do people file Chapter 7?

Many people use a Chapter 7 as a tool to stop a foreclosure or keep a mortgage company from coming after them. If you cannot afford your house, and the property is worth less than what is owed on the property (or there is only de minimus amounts of equity), then a Chapter 7 can be a great tool. Filing Chapter 7 can ensure that debtors are not responsible for any deficiencies that remain after a foreclosure (basically any balance of the loan (s) that a foreclosure sale does not satisfy). Additionally, if the bankruptcy happens prior to a foreclosure being completed, it keeps a debtor’s credit cleaner; a foreclosure would not appear on a debtor’s credit because he/she would not longer have any obligation to pay on the debt at the time the foreclosure happened.

What is discharge in Chapter 7?

Basically, a discharge in a Chapter 7 covers the Debtor’s obligation to pay on their mortgage. A mortgage company cannot force a debtor to pay after a Chapter 7; additionally, if there is a foreclosure, a mortgage company cannot try to collect on any deficiency from the debt. However, in a Chapter 7, the lien remains on ...

What is Chapter 13?

In a Chapter 13, you must submit a plan to the court explaining your intent with the property. This plan will tell the court if you plan to keep or give up a property. It also likely will tell the court how you plan to repay any arrerages on the property. A Chapter 13 can be a great tool to help a debtor catch-up on a first and/or second mortgage.

What is a second mortgage?

A second mortgage is usually referring to a junior debt that is secured against a property. This could be a loan that was obtained at the time of purchase or years later. A second mortgage could be a home equity loan with revolving terms, often referred to as HELOC, or a traditional 15 or 30 year loan.

What happens when you get a mortgage?

When you get a mortgage, your mortgage company gives you a loan. They let you borrow money in order to buy a property. When they do that, they place a lien on the property. A lien is a right or interest in the property that the mortgage company has until the debt (or loan) is paid in full.

How does Chapter 7 affect mortgage?

It all depends on the bankruptcy trustee and how they choose to handle the property. To understand how Chapter 7 impacts your existing home mortgage, you must first understand the difference between a loan and a lien. When you get a mortgage, your mortgage company gives you a loan.

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is also known as total bankruptcy. It’s a wipeout of much (or all) of your outstanding debt. Also, it might force you to sell, or liquidate, some of your property in order to pay back some of the debt. Chapter 7 is also called “straight” or “liquidation” bankruptcy. Basically, this is the one that straight-up forgives your ...

What happens if you declare bankruptcy?

If you declare bankruptcy, there are established procedures of due process. You don’t automatically lose your house. Nor is your loan accelerated to automatically become due if you’ve been current up to this point on your payments.

Can you reaffirm a mortgage debt?

In certain situations, you may have the option of reaffirming the debt to avoid losing the house if you continue making your payments. However, speak to your bankruptcy attorney and mortgage servicer about how to handle the process and what your options are.

Can you get a junior lien stripped off?

If a judge agrees, the junior lien taken out after your first mortgage may be stripped off. One thing to note is that a lender may fight this, so to give yourself the best chance of success, you may want to have an appraisal done before you file for bankruptcy.

Is bankruptcy a bummer?

Bankruptcy is a bummer. No one has ever said “OH MAN! I’m so excited to file bankruptcy! It’s going to make everything so awesome!” That being said, sometimes it needs to be done.

How long do you have to wait to get a mortgage after filing Chapter 13?

Conforming lenders treat dismissals of Chapter 13 bankruptcies more strictly than discharges. That is because, if you go through the entire five years and receive your discharge, you still have to wait another two years before you can get a conforming mortgage. That is a total of seven years form your filing date.

How long is the waiting period for Fannie Mae?

Fannie Mae says: “A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the most recent bankruptcy discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances.”. I have a bankruptcy and a foreclosure.

How long do you have to wait to file for bankruptcy after discharge?

But the wait is four years after their discharge or dismissal (see below for special cases). The waiting period for Chapter 13 bankruptcies is two years. But this is two years after discharge, not filing.

What happens if you don't reaffirm your mortgage?

If you did not reaffirm your mortgage and did not continue to make payments, but did continue to live in the home, that foreclosure will probably be considered a separate and later event. And your wait to buy again starts over, and it will be longer.

How long does it take to get a loan after foreclosure?

In the case of a conforming lender, that’s seven years — following the actual foreclosure, not the bankruptcy. (Extenuating circumstances shorten that to three years,) For government-backed loans, the waiting period following a foreclosure depends on the loan that was foreclosed.

What is discharge vs dismissal in bankruptcy?

There are two ways that a bankruptcy can end. You can jump through all the hoops, pay whatever you’re supposed to pay, and receive a discharge. That means your creditors have to write off any unpaid amounts once the court grants your discharge.

What happens when you withdraw your bankruptcy?

The other ending is a bankruptcy dismissal. A dismissal happens when you decide to withdraw your filing, or because you did not make the plan payments as required, or provided false information to the court. Lenders treat dismissals more harshly than discharges in many cases.

What happens to a mortgage after bankruptcy?

In most cases, a mortgage lender's lien (and right to foreclose on your house) survives bankruptcy. This means that if you want to keep your home, you must pay your mortgage during and after bankruptcy. But if you have a wholly unsecured second mortgage (or other junior lien), you may be able to get rid of it in Chapter 13 bankruptcy (discussed below).

How to get rid of second mortgage in bankruptcy?

If your first mortgage balance exceeds the value of your home, you can eliminate your second mortgage in Chapter 13 bankruptcy through a process called lien stripping. If you are stripping a junior mortgage lien from your home, you don't have to make payments on it during bankruptcy.

What is discharged in bankruptcy?

A bankruptcy discharge is designed to wipe out your personal liability for most types of debt. However, it doesn't automatically eliminate liens from your property. In most cases, a mortgage lender's lien (and right to foreclose on your house) survives bankruptcy.

What happens if you don't pay your mortgage?

But if you don't pay your mortgage, your lender has grounds to ask the court to lift the stay so that it can initiate or continue the foreclosure process. To do this, the lender will have to file a motion for relief from the stay with the court.

What happens if you don't have enough equity in your home?

If you don't have enough equity in your home to secure the second or more junior mortgages, then the bankruptcy court can "strip" the liens securing the mortgages and reclassify the debt as unsecured. This debt then gets paid off through your repayment plan.

What happens if you file Chapter 7 bankruptcy?

In Chapter 7 bankruptcy, most or all of your debts are discharged. In exchange, the trustee is entitled to sell your nonexempt property and use the proceeds to pay your unsecured creditor. That means that if your home has a significant amount of nonexempt equity, the trustee will sell it. To learn if your home has nonexempt equity, see Chapter 7 Homestead Exemption.

How long can you pay off your mortgage after bankruptcy?

If you are behind in mortgage payments, you can pay off the arrears through your Chapter 13 repayment plan (which lasts three to five years). As long as you make your current mortgage payments and your plan payments, the lender cannot foreclose.

How long will the 341 meetings last?

COVID-19 Update: Bankruptcy courts will hold 341 creditor meetings telephonically or by video appearance until 60 days after the termination of the President's COVID-19 National Emergency Proclamation. For details, visit the U.S. Trustee's 341 meeting status webpage or your court's website. If you're one of the many struggling with debt due ...

Can you keep your home if you file for bankruptcy?

If you file (and qualify) for Chapter 7 bankruptcy and your home is exempt, you can continue to make your mortgage payments if you want to keep your home. Although the bankruptcy will discharge your personal liability for the home loan at the end of the case, the lender's security interest in the property remains in force. So, if you don't make your payments, the lender can foreclose.

Can you foreclose on a house if you don't pay your mortgage?

So, if you don't make your payments, the lender can foreclose. If you are behind in your mortgage payments and want to keep your home, you'll have to catch up in order to keep your home. Unlike Chapter 13 bankruptcy, Chapter 7 does not provide a method for you to pay an arrearage through bankruptcy. To learn more about how Chapter 7 bankruptcy ...

Can you foreclose on a home if you have a Chapter 13?

As long as you make your current mortgage payments and your plan payments, the lender cannot foreclose. This effectively gives you more time to make up missed payments. To learn more, see Using Chapter 13 Bankruptcy to Avoid Foreclosure. In some cases, you can get rid of second or third mortgages on your home.

What happens when a person files bankruptcy?

When a person files a bankruptcy, it relieves that person of their eligible debts. In this case, the ex will be relieved of her personal responsibility for the loan. Your son still has personal responsibility for the loan and he is not involved in her bankruptcy.

Can a bankruptcy keep a house?

No, as long as the mortgage payments stay current he will keep the house. The bankruptcy will eliminate the filing debtor's obligation to pay the mortgage but not the obligation of the non-filing co-owner/debtor.

Can a bank take a house if the mortgage is current?

The bank cannot take a house if the mortgage is current. The credit report will show the mortgage involved in a bankruptcy case by a joint debtor on the mortgage and the bank will stop sending statements during the bankruptcy but if payments are made regularly then no problem with the house.

Can a trustee sell a home if there is equity in the home?

If there is significant equity in the home, a ch. 7 trustee would sell the home only if the she still had a legal or equitable interest in the home. However, he would get paid his half of the equity after the sale.

What is a reaffirmation agreement?

Reaffirmation agreements confirm a person’s responsibility for paying that burden, even after discharge of other debts. Filers who default will still owe the “deficiency balance” left on the mortgage note. A deficiency judgment allows banks to sue filers for the outstanding balance after a foreclosure sale.

What happens if you are forgiven for a mortgage?

Once forgiven, you are “absolved” and no longer personally responsible for paying the mortgage. Reaffirmation agreements, on the other hand, keep filers personally liable for making mortgage payments, even after a discharge. They essentially revive the mortgage as if the person had never filed for bankruptcy.

Why are mortgage lenders considered secured creditors?

Mortgage lenders are “secured” creditors because they can reclaim your property if you default on the loan. On the other hand, unsecured debt like credit cards and student loans are not backed by tangible property.

What is the purpose of Chapter 7 bankruptcy?

The goal of filing for Chapter 7 bankruptcy is to have your debts discharged so that creditors can no longer take collection action against you. While the automatic stay temporarily stops creditors from hounding you, a bankruptcy discharge makes that protection permanent and gives you a legal mechanism to enforce the protection.

Do you have to reaffirm your mortgage if you are in bankruptcy?

After all, there is nothing in the bankruptcy laws that requires a reaffirmation for your home loan. They do this to protect filers from the potential disaster if they can’t make the mortgage for some reason going forward and might get stuck with a deficiency balance.

Can a judge dress down a mortgage?

In some states, reaffirming a mortgage is routine and judges gladly approve the agreements. In others, judges can dress down bankruptcy lawyers for even floating the idea. New Jersey and New York are examples. In such states, no attorney would prepare much less file a reaffirmation agreement destined to be rejected by the court.

Do judges approve reaffirmation agreements?

Judges ultimately decide whether to approve reaffirmation agreements on real property. Their stance on reaffirmation of mortgages, in turn, depends on the state. Bankruptcy courts across the country are split on the issue. In some states, reaffirming a mortgage is routine and judges gladly approve the agreements.