Filing for bankruptcy in Pennsylvania raises numerous concerns, particularly regarding one’s mortgage. Homeownership represents stability and security, making mortgage-related questions paramount for those considering bankruptcy. Please continue reading and reach out to a seasoned Montgomery County bankruptcy lawyer from Mudrick & Zucker, P.C. to learn more about how bankruptcy can affect your mortgage. Here are some of the questions you may have:
Can I Keep My Home?
Bankruptcy laws are complex, reflecting the seriousness of declaring financial distress. Under Chapter 13 bankruptcy, you can keep your home while reorganizing debts. This chapter allows for the restructuring of debt into manageable payments, spanning three to five years. Importantly, Chapter 13 bankruptcy demands regular income for plan fulfillment.
In contrast, Chapter 7 bankruptcy involves the liquidation of assets to pay off debts. Yet, Pennsylvania’s homestead exemption plays a crucial role here. Specifically, the Pennsylvania Consolidated Statutes Title 42, § 8123 allows individuals to exempt up to a certain value of their home. If your equity falls below this threshold, your home may not be sold to settle debts. Nonetheless, maintaining mortgage payments remains essential, regardless of the bankruptcy chapter filed.
How Will Bankruptcy Affect Mortgage Payments?
Bankruptcy filing does not inherently relieve mortgage obligations. Regular payments must continue if you intend to keep your home. Chapter 13 offers a mechanism to catch up on arrears through the repayment plan. Conversely, Chapter 7 provides no such mechanism for arrears; however, it might eliminate other debts, potentially freeing up resources for mortgage payments.
Should mortgage payments become untenable, discussing options with your lender is advisable. Some may offer modification programs, potentially reducing payments to a manageable level. Remember, lenders typically prefer modification over foreclosure due to the latter’s high costs. Importantly, you should only communicate with your lender with an experienced attorney in your corner who can help handle negotiations.
Will My Mortgage Terms Change?
Bankruptcy does not directly alter these terms. The agreement made with your lender remains binding post-filing. However, bankruptcy can indirectly influence your mortgage. For example, discharging debts in Chapter 7 bankruptcy may improve your financial situation, indirectly affecting your ability to refinance your mortgage later. Refinancing could offer more favorable terms, including lower interest rates or extended payment periods.
Bankruptcy’s impact on credit is significant. A marked credit score reduction could make refinancing more challenging immediately post-bankruptcy. Importantly, however, rebuilding credit is feasible with disciplined financial management. Over time, lenders may become more receptive to refinancing applications.
Ultimately, though filing for bankruptcy does not automatically resolve mortgage concerns, it can offer pathways to retain your home and manage payments. If you have further questions, or you’re currently considering filing for bankruptcy, please don’t hesitate to contact Mudrick & Zucker, P.C. today. We are here to guide you through each step of the process ahead.