Chapter 13 bankruptcy and mortgage

If you have serious financial problems you may consider applying for bankruptcy. In this case you probably ask your self what will happen to your house. Are you allowed to keep it?

There are 2 main types of bankruptcy: Chapter 7 and Chapter 13.If you have a mortgage to pay and you want to make sure that you will keep your house after bankruptcy then Chapter 13 is the only solution you have.

Also you may think that in chapter 13 bankruptcy the mortgage does not needs to be paid in full. You are very wrong in this case. Debts like mortgage, tax debts or domestic support obligations like alimony or child support needs to be fully paid.

There is another situation: you enter chapter 13 bankruptcy without a mortgage. At one point you may want to buy house (you didn’t receive the discharge yet) and you are wondering if you can receive a loan in your situation. That depends on your income and trustee.

During bankruptcy process you are not allowed to contract any kind of debt without trustee approval. You need to do that because any additional debt may disturb the Chapter 13 bankruptcy plan. If at one point you start making more money and your financial situation is getting better and better the trustee may agree to the loan.

After bankruptcy you don’t need t ask for trustee approval. There is the concern that you will not receive the loan because of the “bad credit”situation.
There are mortgage lenders that are not only willing, but are actually in the business of working with borrowers that have filed chapter 7 bankruptcy or Chapter 13 bankruptcy. The loan conditions may be tougher but you have plenty of chances to get the loan.
We hope that this article answer you question regarding Chapter 13 bankruptcy and mortgage. Feel free to leave a comment if you have additional questions.