A mortgage is a contract in which the two parties agree to certain terms. You have agreed to pay the mortgage at a certain date, for a certain amount. When you file for Chapter 7 bankruptcy, the debt that is discharged is your unsecured personal debt. These are debts such as credit cards, medical bills, personal loans and similar types of debt. As a home loan is secured by the property, it would not be included in a discharge of debt. The advantage is that when your unsecured debt is discharged, and you will have more of your paycheck to manage your mortgage payments, and keep them current.
One option does exist under Chapter 13, in which a second or third mortgage could be "stripped." This could be a possibility for those who bought homes at the peak of the market and are now underwater on their mortgage. The second or third mortgage is no longer considered secured, as the value of the home is so much lower. You could consider this as an option if you are struggling to keep up with an out-of-control mortgage and have been unable to work with your lender and come to a compromise.
There are a number of ways you could retain your home beyond filing for bankruptcy, and the federal government has put several programs into place to help homeowners who were caught up in the sub-prime mortgage boom. Home prices in the area have been rising, and if you can manage to keep current with your mortgage, it is likely that eventually your property will regain its value. At our firm,
Rick Hodge, Attorney at Law, we have worked with countless individuals and families throughout the Kansas City area who are in a mortgage crisis.
We could assist you to gain access to a federal program that could solve your problem, or help you to file bankruptcy if that is the wisest choice, based upon your personal financial situation. Call us for more information about bankruptcy and your mortgage. Your case should be evaluated on an individual basis, as there are likely several options to resolve your mortgage problems.