Paying a mortgage for your house is a monthly obligation. However, if it becomes too difficult for you to pay your bills, the best option is to walk away.
Simply walking away from your mortgage dues, also known as defaulting, will not solve your problems. There’s a high chance that the lender will sue you for not paying the remaining amount.
If you want to keep it safe while walking away from your mortgage, filing a bankruptcy is the better alternative. Note that it’s essential to know how bankruptcy will affect your existing mortgage. If you’re keen to file bankruptcy, you can file for chapter 7. However, if you have substantial equity in your home the trustee may move to sale your house in a chapter 7 proceeding.
Coverage of Chapter 7
So what covers chapter 7? Essentially, the court will decide what assets you need to sell to repay your lender.
Your remaining debt will be discharged, except for some – student loan, taxes, alimony, or child support. Also, filing for chapter 7 will take a hit on your credit. It will stay for at least ten years when you file for it.
In addition, the court will dedicate a trustee to sell or liquidate some of your non exempt assets or properties to pay your lenders. However, you might want to pay for the loan if you want to keep some of your properties.
Accepted Reasons to File Chapter 7
Before filing chapter 7, you must know the reasons before you do it. Below, we discuss some of them. See if the conditions fit you.
- You can’t pay your mortgage anymore. This is the primary reason why you wish to file for chapter 7.
- You have a greater mortgage balance than your house’s worth. Note that your house is not worth keeping if your mortgage balance is more than the value of your home.
Thus, filing chapter 7 will allow you to safely walk away from your mortgage payment.
- You want to surrender your house. Everyone has their reasons for not keeping their houses. However, it would be wiser to sell it rather than surrender your house if you have home equity. Doing this will earn you a profit. Otherwise, the trustee will sell your house or auction it in a foreclosure sale.
In Summary
Walking away from your mortgage payments by filing chapter 7 is the most viable option for you. In this way, the lender won’t be able to sue you for anything. The sad thing is, you need you will need to move out.
However, before you head on to file chapter 7 and walk away from your home note that there are other options like Chapter 13.
Contact your lender and other creditors about your current situation. You may seek a lower rate, a particular payment plan, or a deferment to save you from bankruptcy in the future.