Can a bankruptcy help if I am behind on my mortgage?

Foreclosure is among the top fears Tennessee homeowners face when they begin experiencing financial problems. In most cases, getting 3 or more months behind on your payments can spur mortgage companies to action, including stopping acceptance of any payments and beginning foreclosure.

Chapter 7 may not work

Many people think filing a Chapter 7 bankruptcy is the best way to deal with foreclosure. While Chapter 7 often makes sense for consumer debt, if you face foreclosure, this type of bankruptcy may only delay it. While Tennessee law does provide for home equity exemptions that would stop the trustee from including your home in the sale of your assets, if your equity exceeds the set exemption amount, the trustee may sell your home and use the proceeds to pay creditors.

Chapter 13 bankruptcy may stop foreclosure

Chapter 13 bankruptcy could make more sense for debtors concerned about keeping their homes. This kind of bankruptcy involves a repayment plan, which may allow you to gradually repay your arrears. Chapter 13 debtors may also have the possibility of working out a loan modification while in bankruptcy. So, while this bankruptcy will not let you off any existing debt, including mortgage payments, it can offer a viable option that may allow you to keep your home.

Potential consequences of foreclosure

If you have concerns about a bankruptcy's effects on your credit, consider that a foreclosure may have a similarly damaging impact. You may also end up owing taxes if the foreclosure buyer purchases your home for less than the remaining amount on your mortgage.

A qualified bankruptcy attorney can help you get the most out of a difficult situation. The further along the foreclosure process moves, the more difficult it can be to change things, so do not wait until you receive an eviction notice to call a lawyer. The financial and legal matters involved can have serious long-term ramifications for you, so this is not the time to take steps on your own. Your attorney can fullly explain available options and take action to protect your interests.

 

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Christopher Kerney Attorney at Law
102 Public Sq
Gallatin, TN 37066

Phone: 615-206-3004
Fax: 615-451-0084
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