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Homeowners can leave properties under Chapter 13 bankruptcy

New Jersey homeowners may be interested to know that it is possible to walk away from their homes while inside an active Chapter 13 bankruptcy. If a property owner decides the mortgage is simply no longer affordable, one can let the estate go into foreclosure; however, there are certain factors that should be taken into consideration before making the final decision.

One should consider why a Chapter 13 bankruptcy was filed. The purpose of Chapter 13 is to allow the homeowner to catch up on delinquent mortgage payments and keep the home. Chapter 13 is essentially a repayment plan of one’s debt over a span of three to five years.

Those who are current on their mortgages are often eligible for Chapter 7 bankruptcy, which erases unsecured debt such as credit cards and personal loans. Debtors are able to keep their homes and assets under Chapter 7. If eligible, it is possible to convert a Chapter 13 bankruptcy to a Chapter 7.

Majority of people under Chapter 13 do not qualify for Chapter 7 because their household incomes have been determined to be too high. Once it is established a property owner is not entitled to a Chapter 7 filing, it is possible to simply cease paying the mortgage if the home is no longer affordable. The loan office will eventually take the property out of bankruptcy protection and proceed with foreclosure.

A bankruptcy attorney may be able to review a proprietor’s income, expenses and assets to find out if a financially strapped landowner meets the requirements for a Chapter 7 bankruptcy filing. Though bankruptcy laws now have stricter eligibility conditions, a lawyer may explore a variety of debt relief and debt reorganization options.

Source: FOX Business, “Can I Walk Away From Home in Bankruptcy“, Justin Harelik, December 11, 2013

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