If you file for bankruptcy protection should you continue to make the payment on the mortgage each month? This is a common question that debtors have, and this is true whether the debtor is filing for chapter 7 bankruptcy or chapter 13 bankruptcy. In some cases both chapters may will allow you to keep your home, but neglecting to make currently due mortgage payments or failing to pay homeowners association fees and costs could have a big impact on your case.
If you stop making your mortgage payments or any homeowners association dues as they become current then the bankruptcy court may determine to remove the automatic stay which prevents a foreclosure from proceeding. In many cases filing for bankruptcy protection is needed to prevent or stop the home from being foreclosed on, and neglecting to make payments as they become due can actually damage the effort to stop a foreclosure.
The automatic stay that bankruptcy offers is intended to meet a number of goals. This stay allows you time to think straight and formulate a plan of action for your debts, and while the stay is in effect creditors can not attempt to collect on any debts listed with the bankruptcy court without court permission.
As soon as you file for bankruptcy protection and the bankruptcy court has received the petition then the automatic stay generally goes into effect. Once creditors are notified that you have filed a bankruptcy case and the debt owed to the creditor is listed then the creditor could face steep sanctions if any debt collection attempts are made. Without specific permission from the bankruptcy court.
A chapter 7 bankruptcy usually discharges most if not all of the debts involved in the case, but it may be possible to reaffirm mortgage debt if you want to keep your home even though you have filed for bankruptcy protection. If the mortgage payments and any homeowner association dues relevant to the property are not kept current then the lender may refuse to affirm the debt because a past due balance is owed.
When you file for chapter 13 bankruptcy protection the process is a little different. This chapter of the bankruptcy code allows for debt reorganization and a repayment plan that the court approves. With chapter 13 bankruptcy the scheduled payments that you must make are based on your household income and expenses. If there are past due payments then it may be possible to include this amount into the scheduled payments.
If you are past due on any mortgage payment amounts when you file for chapter 13 bankruptcy then the trustee will ensure this amount is paid from the scheduled payments that are made each week or month. The bankruptcy court evaluates your income amount and ability to pay, after deducting the monthly bills and expenses that you have.
With a chapter 13 case it is usually possible to keep your home, but it is still essential that you stay current with any mortgage payments and homeowners association fees while you are going through the bankruptcy process. Failing to do this after the repayment plan has been approved by the bankruptcy court could cause the creditor to win a petition to start foreclosure proceedings in spite of the automatic stay.
Whether you file for chapter 7 or chapter 13 bankruptcy protection it is very important to make the monthly mortgage payments and association dues until the bankruptcy judge tells you to stop, especially if you are trying to keep the property and prevent any foreclosures. You should also continue to provide any needed maintenance and repairs during this time as well.