What Happens To My Home After Bankruptcy?
I was on the phone yesterday morning with a client. When I say morning, I mean early. My toddler daughter was still in her crib sleeping. I was surprised to hear from him that early, but I knew he needed to talk. We had filed his case several months earlier, and his discharge order had entered.
Even so, he was still having problems. A year ago he had lost his high earnings job and still hasn’t found a job that paid him as much. When we filed his case, he and his wife were still in the hole several hundred dollars every month. Last week they found out his wife was losing her job. He was understandably anxious about their situation and wanted to see if there was anything I could do to help.
One of the things we talked about was his mortgage. When they filed, they wanted to keep their house and were still current. He was sure they weren’t going to be able to make a payment next month, though. His biggest concern was that his mortgage lenders (there’s a second mortgage) were going to foreclose and come after him for any money that he still owed after they sold the house.
That’s when I realized I hadn’t explained clearly enough what happened with his mortgage when we filed his case. His mortgages were listed on his bankruptcy petition (as all debts are required to be). Also, we indicated that their intention was to retain the house and pay the mortgage according to its current terms. (As an aside, many mortgage lenders will try to coerce debtors into signing a reaffirmation agreement. They are not required for home loans, and you will find very few lawyers who will advise a client to sign one.) The effect of his filing was that he was relieved of his promise to repay the loan. Practically speaking that meant that as long as he keeps paying his mortgage, the lender can’t foreclose. Once he stops paying they can commence foreclosure proceedings (after they get the bankruptcy court’s permission). However, since his promise to repay the loan was discharged they cannot sue him for any deficiency owing after they resell his house.
My client had been looking at every possible scenario to make ends meet and believed the only way was to finally surrender the house, but he was concerned about once again being in debt for the deficiency. His voice was filled with relief when I walked him through his options and what consequences there would be if he stopped paying his mortgage. As you can imagine, he is disappointed to have to leave his home. But he understands that making hard choices like that can have positive results.
The purpose of this post isn’t just to educate you on what happens if you can’t make your mortgage payments after you file. It’s also to remind you that filing bankruptcy can be more than just an administrative process, a matter of preparing and filing paperwork. It requires thoughtful and expert problem solving skills and counseling. I’m available to my clients whenever they need me, even after the court closes the case. While I hope I never have to file a second bankruptcy for one of my clients, I do hope that they’ll always think of me when they need help figuring out a problem.
Talk To A Colorado Bankruptcy Lawyer About What Happens To Your Home In Bankruptcy
Bankruptcy may provide several options for you if you’re trying to keep your home. If you’re considering bankruptcy, we hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy attorney. You can schedule your appointment online or call 303.331.3403 to set up a time that’s convenient for you.