Once your debt surpasses a certain point, you may start wondering if filing for bankruptcy might give you the fresh start you need to get your financial affairs back in order. Many North Carolina residents struggling with increasingly overwhelming debt decide to file for bankruptcy, and if you count yourself among them, you may wonder about its potential impact on your mortgage.
According to Rocket Mortgage, there are two main types of consumer bankruptcies: Chapter 7 filings and Chapter 13 filings. Whether and how your bankruptcy filing might affect your mortgage depends to some extent on which type of filing you initiate.
Chapter 7 bankruptcies and your mortgage
Whether you keep your home when you file for Chapter 7 depends on several variables, including whether it qualifies for an “exemption.” This depends on how long you lived in it and how much equity you have in it. If the property is exempt, you may be able to hang on to it despite filing for Chapter 7 if you continue to make mortgage payments. If you fail to stay current on mortgage payments or if it does not count as exempt property, you may have to turn your home over.
Chapter 13 bankruptcies and your mortgage
Chapter 13 bankruptcies involve restructuring your assets in a manner that makes them more manageable. If you keep up with all of your required payments and stay on top of your mortgage, your filing for Chapter 13 should not hinder your ability to remain in your home.
Whether you are able to file for Chapter 7 in the first place depends on if you meet certain income requirements. If you do not, you may have to either file for Chapter 13 or wait six months and try to qualify for Chapter 7 again.