The Relationship Of Bankruptcy And Mortgage

Filing for insolvency might not be the most popular way to get you out of financial trouble

. In fact many financial experts may advise against it unless there is no other plausible way for you to get rid of your increasing debts. This is because insolvency may have a huge effect on many aspects of your life from financial to psychological. One of the many things that are normally affected by insolvency filing is your mortgage. It may not really matter whether you are filing for Chapter 7 or 13 bankruptcies because any kind of insolvency may affect your current mortgages and perhaps even future home ownerships. This is probably why it may be a good idea for you to weigh the consequences of bankruptcy and mortgage application or refinance before you go ahead to file for insolvency.

Bankruptcy and mortgage do have considerable effect on each other but it is normally insolvency that has bigger effects on mortgages rather than the other way around. Basically the extent of the effects bankruptcy filing may have on your mortgages may depend on the type of insolvency that you may be qualified to file. If you are qualified to file for Chapter 7, you may be liquidating as many of your assets including your home that are not listed as exempt to pay off your creditors. Normally you may only be allowed to retain a few personal effects for basic necessities such as clothes and work related tools. On the other hand, filing for Chapter 13 allows you to work out a repayment schedule with an appointed trustee where late charges and penalties may be eliminated without having to liquidate your assets that include your home. By doing so you may be able to retain your property. Generally lenders prefer Chapter 13 over 7 because you will actually be attempting to repay your debts instead of just writing them off. Either way, there is no guarantee that you may be able to retain your home or mortgage after the discharge of your insolvency.

Normally you might risk losing your home if you file for Chapter 7 insolvency but you may still be able to save your home if you wish to. You may have to file a reaffirmation agreement with your mortgage provider and come up with a plan so that you can clear your delinquent account within a specific period of time. This of course depends upon the discretion of your mortgage provider but many mortgage companies would prefer this method instead of seizing your property. Mortgage companies or banks normally would prefer steady monthly repayments over foreclosing your home due to the high costs of foreclosing.

Even after filing for insolvency you may not end up losing your home at all. However, many of you may think that it is impossible for you to do anything with your current mortgage except to try to pay it off as per the original agreement. Many of you might not realize that you may still be able to get a second mortgage on your home even after insolvency filing. Of course it may not be as easy and there are a few things that you should be expecting like higher interest rates but it may still be obtainable. Some experts may advice against getting a mortgage refinance with your current lender but you may have the option of applying with a sub prime lender. Sub prime lenders generally specialize in providing loans or mortgages for applicants with history of insolvency, foreclosure or repossessions.

In general, filing for insolvency may have a huge impact on your finances including your mortgages. What you may need to realize is that although insolvency might make it slightly more difficult for you to regain your financial stability and be up to date with your debt repayments, with enough knowledge, spirit and determination you may be able to rebuild your finances and obtain financial freedom.

by: Ask Bill

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