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Walk out of bankruptcy debt-free? Maybe, but if you don’t pay the mortgage then you’ll still lose the house.
When you take out a loan to buy real estate, the bank takes a lien out on the property. Fail to pay the mortgage and the bank will foreclose on the lien to take back the property.
That lien is called a mortgage, and it’s a document that’s filed in the same place where the deed is filed. It differs from the promissory note, which is the promise to repay the money.
Related: Liens Explained
Fail to pay the money, and the bank uses the mortgage to foreclose.
The Effect Of Bankruptcy On A Mortgage
If you file for Chapter 7 bankruptcy, you will discharge your personal liability for repayment of the promissory note. A failure to pay the bank after your discharge will lead to a foreclosure, but the bank won’t be able to sue you for the deficiency if your state law allows for one (California doesn’t allow for deficiency judgments after foreclosure).
In the case of a Chapter 13 bankruptcy, the end of the case cures any mortgage arrears but doesn’t necessarily wipe out your obligation to pay after the case is over.
Related:
What The Lender Gets After Bankruptcy
The bankruptcy discharge wipes out your personal liability under the Promissory Note.
After the bankruptcy discharge, the creditor with a lien can exercise its rights to foreclose if you don’t pay.
So the lender gets the house, but not a hand in your pocket.
Keep Paying If You Want To Keep The House
If you don’t pay the mortgage, the bank will foreclose. So if you want to keep the house, keep paying.
If not, then you can let it go after your Chapter 7 bankruptcy case.
If you’ve gone through a Chapter 13 bankruptcy, the best bet is to provide for the surrender of your interest in the property through your Chapter 13 Plan.
Either way, it’s important to know that liability for a deficiency – which doesn’t exist in California anyway – differs from keeping your home.
The discharge doesn’t prevent foreclosure.
Filing chapter 13 bankruptcy is not a one-shot deal. You do have the ability to file another chapter 13 bankruptcy case should your first case fail states Chapter 13 bankruptcy attorney David Siegel. No one sets out to fail in bankruptcy. Debtor’s and their counsel wish to file a perfect chapter 13 petition and to+ Read MoreThe post Chapter 13 Bankruptcy Attorney States “You Get More Than One Shot” appeared first on David M. Siegel.
Filing for bankruptcy in Chicago does not mean that you lose your home. You can often maintain your home by making current payments under either chapter 7 bankruptcy or chapter 13 bankruptcy. If you do wish to surrender your home and you have filed chapter 7 bankruptcy, you still have time in your home. Under+ Read MoreThe post How Filing For Bankruptcy In Chicago Intersects With Foreclosure appeared first on David M. Siegel.
Do not ignore that American Express, Visa, Golden One Credit Union, Credit Bureau USA, Midland Funding LLC lawsuits! These companies will take their judgments and convert them into wage garnishments and liens on real property.
If you have been sued by Midland Funding LLC or American Express, you will find out when someone hands you or a family member papers. Typically a debtor has 30 days to respond to the complaint. Before doing anything else, please Consider hiring an attorney. That attorney, even if it is not me, will make sure to file an answer so that you can fight the lawsuit. By not filing an answer, you are conceding the case. It will be only a matter of months before you see very negative implications. By filing an answer, you have at the very least given your self at least a year to determine whether their claim is valid and to enter into tough negotiations, if necessary.
If you ignore the lawsuit, there is not much that can be done. The credit card company has all the power. They are going to file a judgment approximately a month after the complaint is served. With the judgement, the creditor can easily garnish wages or put a lien on your house. To garnish credit card company. Eventually, the the credit card company files a default judgement against the debtor, and then files an abstract judgment against the property.
If you cannot come to terms with the credit company, a Chapter 7 can be used to get rid of the debt, along with the wage garnishment and the lien on the house. However, the process is a little more complicated when a credit card company records a lien. In a typical bankruptcy, debtors will not personally liable for discharged debts or a valid lien from a credit card judgment. However, the lien will attach to the house. It will need to be paid when you sell or refinance the property after the bankruptcy case is filed.
In the chapter 7 bankruptcy, a special motion will need to be prepared and presented to a bankruptcy judge to cancel that lien. This motion will add to the cost of your bankruptcy. Once that has been done, the abstract judgment will be made unenforceable.
Photo Credit: http://www.flickr.com/photos/americanexpressonline/
Is it true you have to be a certain age to file for bankruptcy protection? Technically there is not an age limit that states you have to be a specific age in order to file. Yet, you may have to live in a jurisdiction for a certain time period when you file. Others may say [...]
There are times when filing chapter 7 bankruptcy would be a mistake. The most common type of mistake made in filing a chapter 7 bankruptcy is the fact that assets are going to be taken by the chapter 7 trustee. In the state of Illinois, you are allowed to protect a certain amount of property+ Read MoreThe post When Not To File Chapter 7 Bankruptcy appeared first on David M. Siegel.
Filing Chapter 7 bankruptcy can eliminate most unsecured debt. Unsecured debt is debt that is not secured by any kind of property. This means that if you don’t make a payment, there is no property that can be taken back by the creditor. Unsecured debt is typically credit card debt, medical bills, utility bills, and+ Read MoreThe post What Type Of Benefits Can Be Achieved Through Filing Chapter 7 Bankruptcy? appeared first on David M. Siegel.
Filing bankruptcy in Chicago is not too difficult provided that you have proper representation and a good foundation going forward. You are going to want to find an experienced bankruptcy attorney to assist you in the filing of your chapter 7 bankruptcy case. Do not choose a bankruptcy attorney simply based on the lowest price.+ Read MoreThe post How Hard Is It To File Bankruptcy In Chicago? appeared first on David M. Siegel.
You want to go through bankruptcy to get a discharge. The problem is, you likely have no idea as to what that means.
In the real world, a discharge is grounds for a trip to the doctor.
But in the world of bankruptcy, a discharge is a legal release from personal liability for payment of a debt.
Doesn’t help? OK, how about this:
When the bankruptcy court discharges you from a debt, you don’t have to pay it back. Not now, not ever.
Of course, there’s more to it. Here’s your handy guide to the discharge in bankruptcy.
What Is The Discharge In Bankruptcy?
As with everything online, when defining a term we look to Wikipedia. It’s not always perfect, but this is fairly accurate:
A discharge in United States bankruptcy law, when referring to a debtor’s discharge, is a statutory injunction against the commencement or continuation of an action (or the employment of process, or an act) to collect, recover or offset a debt as a personal liability of the debtor. The discharge is one of the primary benefits afforded by relief under the Bankruptcy Code and is essential to the “fresh start” of debtors following bankruptcy that is a central principle under federal bankruptcy law.
Simply put, the discharge is what prevents a creditor from trying to collect money from you after the bankruptcy is completed.
What Debts Are Discharged In Bankruptcy?
The discharge differs based on the type of bankruptcy case you file.
In a Chapter 7 bankruptcy case, most of your debts are wiped out when the discharge is issued. There are, however, some exceptions such as:
- certain tax debts;
- debts for spousal support (alimony) or child support;
- debts to government agencies for fines and penalties;
- student loans;
- debts for personal injuries incurred as a result of DWI/DUI; and
- court fines and penalties, including criminal restitution.
In a Chapter 13 bankruptcy, some marital debts can be wiped out. In addition, the Chapter 13 Plan allows you to wipe out some second mortgages, catch up on arrears on mortgages and car loans, and pay off tax debts that couldn’t be wiped out in a Chapter 7.
There are some nuances, such as when you file a Chapter 13 bankruptcy and can’t complete the Plan. In that situation you may be able to qualify for a hardship discharge, which differs to some extent from the regular one in a Chapter 13 case.
There are also limits to your ability to get a discharge after a previous bankruptcy case.
Related:
- Chapter 7 Bankruptcy Explained
- Chapter 13 Bankruptcy Explained
- Hardship Discharge In Chapter 13 Bankruptcy
- Getting A Discharge After You’ve Been Through Chapter 7 Bankruptcy
When Does The Discharge Get Handed Down?
The discharge is handed down at the end of the bankruptcy case.
For Chapter 7 cases, that’s about 120 days after filing.
In the Chapter 13 situation, discharge occurs when the Plan is completed.
The Form Of The Discharge
The Discharge of Debtor is a one-page document that’s generated by the Clerk of the Court and stamped with the bankruptcy judge’s name or signature. It doesn’t list each debt on your bankruptcy, and looks like a form.
In fact, it is a form.
Related:
- How Long It Takes To Complete Chapter 7 Bankruptcy
- Click here to see the Chapter 7 Discharge form.
- Click here to see the Discharge of Debtor After Completion of Chapter 13 Plan
Collections After Discharge
Just because a debt has been discharged doesn’t mean the creditor will follow the law.
In fact, sometimes creditors will sell your debt to another company that will try to collect the debt from you.
That’s illegal under not only the bankruptcy laws but also under other state and federal collection laws.
Protect Your Discharge
For the most part, the discharge is forever.
Though there are some situations in which your discharge can be revoked (that is, taken away) by the bankruptcy court, that’s exceptionally rare. Learn about revocation of your bankruptcy discharge by clicking here.
It’s the most powerful remedy the law provides against creditors and debt collectors. By drawing a line in the sand and forbidding your creditors from crossing it, the discharge gives you peace of mind that lasts forever.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.