Filing for bankruptcy is a significant decision that affects various aspects of your finances, including your mortgage payments. The decision to continue paying your mortgage during bankruptcy largely depends on the type of bankruptcy you file, your overall financial situation, and strategic legal guidance from a bankruptcy lawyer.
At Law Offices of Terrence Fantauzzi, we guide our clients through these decisions by weighing the benefits and risks associated with each option. Contact us at (909) 552-1238 for a free legal consultation.
Understanding the Impact of Different Bankruptcy Types
Chapter 7 Bankruptcy and Your Mortgage
Chapter 7 bankruptcy, also known as liquidation bankruptcy, might allow you to discharge unsecured debts like credit card bills and medical expenses. If you are current on your mortgage and want to keep your home, you should continue making mortgage payments during Chapter 7 proceedings to avoid foreclosure. Additionally, utilizing exemptions like the 704 Series can protect a significant amount of your home’s equity from being liquidated.
Chapter 13 Bankruptcy: A Different Approach
In contrast, Chapter 13 bankruptcy offers a reorganization of your debts into a manageable repayment plan over three to five years. This type of bankruptcy is particularly beneficial if you’re behind on your mortgage. It allows you to catch up on missed payments gradually while keeping up with current payments, thus preserving your investment in your home. During this time, automatic stays will prevent foreclosure and other creditor actions, giving you breathing room to stabilize your finances.
Evaluating the Pros and Cons of Paying Your Mortgage
Advantages of Continuing Mortgage Payments
- Asset Protection: Maintaining regular mortgage payments helps protect your home from foreclosure.
- Credit Benefits: By staying current on your mortgage, you demonstrate financial responsibility, which can positively impact your credit score post-bankruptcy.
Disadvantages of Continuing Mortgage Payments
- Financial Strain: Allocating funds toward your mortgage might limit your ability to settle other debts, potentially complicating your financial recovery.
- Negative Equity: If your home’s value is less than what you owe, continuing to invest in the property may not be financially prudent in the long run.
Making an Informed Decision
Before deciding whether to continue paying your mortgage during bankruptcy, consider the following steps:
- Assess Your Home’s Equity: Understanding whether you have positive or negative equity in your home can influence your decision.
- Evaluate Your Financial Situation: Review your overall financial health beyond just your mortgage to determine the most strategic approach to handling your debts.
- Consult With a Professional: Discussing your options with a bankruptcy attorney can provide insights tailored to your specific circumstances and legal options.
Contact Us for a Bankruptcy Consultation
Deciding whether to pay your mortgage during bankruptcy involves a careful analysis of your financial status, the type of bankruptcy you are considering, and the potential outcomes of each choice. At Law Offices of Terrence Fantauzzi, we are committed to helping you navigate these complex decisions with comprehensive legal advice and personalized service.
If you’re considering bankruptcy or have questions about how it could affect your mortgage payments, contact us at (909) 552-1238 for a free consultation. Our experienced attorneys are here to help you achieve the best possible financial outcome during these challenging times.