Paying off loans can be tough. Sometimes, it’s so tough that people may need to file for Chapter 13 bankruptcy. This is a plan that helps people reorganize their debt, allowing them to repay some or all of their obligations in three to five years.
As a homeowner, it is possible for you to file for Chapter 13. However, you might be concerned about how this affects your mortgage loans.
Your home under Chapter 13
Filing for Chapter 13 bankruptcy offers a lot of benefits. One of them is that it could help you avoid foreclosure and keep your home. If you are behind on your mortgage payments, you can include the arrears (past due amounts) in your Chapter 13 plan and pay them off over time. This way, you can catch up on your mortgage and prevent the lender from foreclosing on your home.
Limitations to consider
While you can keep your home under Chapter 13, you may still have to make regular payments to your mortgage as they come due during the bankruptcy period. If you fail to do so, the lender can compel the court to resume the foreclosure process. Therefore, it is essential that you have enough income to afford both your mortgage payments and your Chapter 13 plan payments.
Refinancing or modifying the terms
Another method to handle your mortgage loans during Chapter 13 bankruptcy is by refinancing or modifying your mortgage terms. Refinancing means swapping your current mortgage with a new one with better terms. Modification, on the other hand, involves changing the terms of your existing mortgage. Both options can lower your monthly payments. However, during Chapter 13 bankruptcy, getting bank approval for these could take time and effort. You must show you have sufficient income for a new loan and have been making timely payments. More importantly, you’ll need court and bankruptcy trustee approval to refinance your original loans.
Paying off your mortgage regularly
During bankruptcy, you can still keep your home if you make your payments regularly and follow the rules of your repayment plan. Chapter 13 bankruptcy could be a beneficial way to manage your mortgage loans in Indiana, but it comes with its own set of rules and limitations. So, it’s crucial to stay on track with your payments and fully understand the repayment plan.
