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West Palm Beach Bankruptcy & Business Attorneys > > Bankruptcy Attorneys > Will You Get A Free House In Bankruptcy?

Will You Get A Free House In Bankruptcy?


When you think of bankruptcy, you may often think of losing your stuff—even though in reality, most people don’t lose much or any property in their bankruptcy. It is still a common myth that you will lose property, but there is also another myth that goes the opposite way: Will you get a free house? Can you walk away from your bankruptcy without owing any money on your mortgage, or without a mortgage at all?

As a general rule, the answer to that is no. Bankruptcy does not allow people to simply walk away owing nothing on a mortgage, and still owning your home.

Bankruptcy Can Still Help

However, there are options. You can opt to surrender your home, and owe nothing on the loan. This is often helpful to people who are living in property with negative equity where they owe more than what the property is worth. Normally, they would personally owe the balance of the loan—the amount of the loan that exceeds what the home is worth.

In this situation, owners can’t do anything—they can’t sell the house, because they owe too much, and they can’t just give the property back to the bank, or they will owe the balance of the loan (not to mention ruining their credit).

Bankruptcy will allow owners to walk away from property and never owe any money on the loan.

Keeping Your Home

You don’t have to walk away from your home—there are options to keep it.

You also have the option in bankruptcy, to bring the payments of your mortgage current if you are behind on your payments. This is possible in a Chapter 13 bankruptcy, which allows you to pay off what is in arrears (that is, the total of the payments that you are behind on) over the 3-5 year term of the payment plan.

This means that you will have to pay the arrears over the 3-5 years, as well as your normal mortgage payment. But if this is doable (that is, if you can afford both the arrearages and the normal payment), at the end of your case your mortgage is considered current, and you will not be foreclosed on. The bank would almost never offer you this resolution, outside of bankruptcy.

There is no payoff plan in a Chapter 7 bankruptcy the way that there is in a Chapter 13. However, many people who file for Chapter 7 do find that the time the bankruptcy provides them, gives them extra time to work out a loan modification with their lender. That is, it allows them time to work out a payment plan, or get current with their mortgage.

Keeping Equity

No matter what happens, the equity in your home is almost always protected. That means that you will not have to worry about losing your home just because you file bankruptcy, assuming you are current on your mortgage at the time that you file.

Call the West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller at 561-264-6850 for help keeping your home in a bankruptcy.



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