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