If you have debt problems and you need a new financial beginning then bankruptcy can help you achieve this most of the time. What happens if you have a reverse mortgage though? Can you still file for bankruptcy protection or will you need to choose another debt relief option instead? In a majority of cases a reverse mortgage will not prevent you from getting debt relief by filing for bankruptcy. This type of mortgage provides cash from the equity that has been built up in the property, and there are many different types of these contracts that may be entered into.
If you have a reverse mortgage this may allow you to discontinue making mortgage payments at all. You may also be able to use a line of credit or receive a check that you can cash as some of the possible features. You must meet the qualification criteria for this type of program, and you will also need to consult with an experienced bankruptcy lawyer to ensure that you get accurate legal advice in this area. The exact contract that was used can determine how your bankruptcy case may be affected.
Most of the time a reverse mortgage has specific age requirements, and you will usually need to be at least 62 years old before you can take advantage of these programs. You will normally be required to have a considerable amount of equity built up in the property. Most lenders will not loan more than 50% of the accrued equity in a residence, even if all of the other criteria are met. These contracts can offer a wide range of benefits, and can include certain features that are preferred. You may choose to take a one time lump sum, you could receive monthly payments, or you may choose a lender that offers a line of credit instead. Each of these may impact any bankruptcy case differently.
If you choose a reverse mortgage with a lump sum payout then the timing of the payment can be very important. If the money was received more than 6 months before you file then your bankruptcy case may not be affected at all. A line of credit may or may not affect the case, depending on your specific situation. If you receive a monthly stipend from the lender then this may need to be reported and counted as income in the bankruptcy petition and proceedings. That can mean the difference between filing under chapter 7 or chapter 13 of the bankruptcy code.
If you have a reverse mortgage and you are considering bankruptcy because you need debt relief and a new start in your financial life then you should consult a qualified bankruptcy lawyer as soon as possible. The equity that you have in the home, any mortgage balance, and the type of contract involved are all important factors that can impact how any potential bankruptcy case turns out. The right debt relief specialist can offer advice on how to protect as much property and income as possible. Sometimes you may need to reaffirm the reverse mortgage debt to continue receiving payments.