If you own a home and are considering filing for bankruptcy protection, you likely have many questions about how your home and mortgage will be affected by filing. First, understand that every bankruptcy case is unique and your options and how you will be affected is specific to your circumstance. Second, the following is information generally – to explore how bankruptcy will affect you specifically we encourage you to consult with a bankruptcy attorney. We offer free consultations to anyone in or around the Savannah, GA area.
How Does Bankruptcy Affect My Mortgage?
The mortgage on your house has two elements: your personal liability to pay back the money you borrowed and the lien attached to the house as collateral.
- The promissory note you signed when you took out the mortgage includes the borrowing terms, interest rate, and other legal provision of the loan.
- The lien your mortgage lender has on your home grants the lender the right to foreclose on your home (take back the property) in the event that you default on loan payments.
After a successful Chapter 7 bankruptcy filing, you would no longer be personally liable to pay back your mortgage. However, the lien against your house still exists and your lenders right to foreclose if you default on payments survives bankruptcy. Chapter 13 bankruptcy does not erase your personal liability on your mortgage, and similarly, the lien against your house still exists as well as the lenders right to foreclose.
If you want to keep your house, you must continue to make your monthly mortgage payments to the lender. You must also get current on any missed mortgage payments.
Also, you may want to consider the pros and cons of reaffirming your mortgage during Chapter 7 bankruptcy. This means you would sign paperwork that reaffirms your personal liability on the debt. There are other implications of reaffirmation agreements as well, which we will explore during our free consultation.
Alternatively, if you do not want to or cannot keep your home, you have the option to surrender your home and erase the debt. You would no longer be liable to pay back the mortgage or liable to pay back any deficiency resulting from what the house sells for versus the amount that you owed on the loan.
Bankruptcy is a complex and nuanced area of law. To have your questions about bankruptcy in Georgia answered, come meet with us for a free consultation. We proudly serve the people of Savannah, Chatham County, Effingham County, Bulloch County, Bryan County, Liberty County, and Long County.
Call us today at (912) 351-9000 or contact us to schedule a free consultation.
The Law Office of Barbara B. Braziel has over 37 years of bankruptcy experience. We are the premier bankruptcy law firm in Savannah, GA and we practice exclusively in bankruptcy law. We invite you to get to know us here and read about the clients we’ve helped here.
Find out more about Bankruptcy in our guide: All About Bankruptcy.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.