If You Are Current on Mortgage and Other Home-Related Debts
A Chapter 7 “straight bankruptcy” is generally designed for more straightforward debt situations, including those on your home. If you are current on all obligations legally tied to your home, and you intend to keep your home and keep up on your mortgage payments, your home and your mortgage will very likely sail smoothly through a Chapter 7 case.
This means being current not only on your mortgage (and any second or third mortgages), but also on the real property taxes, any homeowner association dues. And it also helps if you don’t have any income tax liens or other obligations encumbering the title to your home. If you have problems with any of these, a Chapter 13 “adjustment of debts” may be a better solution.
If You Are Not Current on Your Mortgage But Aren’t Far Behind
If these other issues don’t apply to you but you ARE a few months behind on your mortgage, Chapter 7 may still work for you. Generally your mortgage lender will require you to catch up on your arrearage. This usually means that you have to make your regular monthly payments PLUS enough extra each month to pay off the arrearage within a certain length of time, often no more than about a year. You and your attorney need to look closely at your budget to see how much you could afford to pay monthly towards that arrearage after you no longer need to make payments on the debts that you are discharging (legally writing off) in your Chapter 7 case.
How much time you would have to catch depends on your lender and on your history of payments. You may qualify for a loan modification, wrapping the arrearage into the new mortgage loan with new payment terms, usually avoiding having to catch up on the back payments. Your attorney, who negotiates with mortgage lenders every day, will inform you about your options.
If you are not able to catch up on the mortgage within the time required by your lender, a Chapter 13 case can usually buy you much more time to do so, up to 5 years.
If You Have a Judgment Lien Against Your Home
Chapter 7 is quite limited in how it can help deal with debts that are liens against your home’s title. So if you are behind on property taxes or homeowner association dues, have an income tax or child support lien, or a lien arising from a dispute with building contractor, and you want to keep your home, there’s a good chance that Chapter 13 would be a better way to address these.
However, if there is a simple judgment against you which has turned into a lien against your home by the creditor filing that judgment in the county in which your home is located, that judgment lien may well be able to be “avoided”—erased—within your Chapter 7 case. Certain conditions must be met regarding the amount of equity in your home and the amount of the judgment lien. Be sure to tell your attorney about the judgment right when you meet him or her, to determine whether the conditions for “avoiding” the judgment lien can be been met.
Contact the law Office of Andrew B. Finberg
To see if a Chapter 7 is the right tool for you and your home, if you are in New Jersey let us help you understand your options. The Law Office of Andrew B. Finberg works with individual consumers and business owners facing financial challenges. Please call (856) 988-9055 or use this form to contact your New Jersey bankruptcy attorneys at the Law Office of Andrew B. Finberg, LLC. Thank you.