If you’re currently involved in a bankruptcy case or are considering filing to get on top of your debt situation, you might have questions about how the matter will impact your financial future. The truth is that bankruptcy does have a significant impact on your credit rating, which – in turn – can affect other areas of your life. One area in particular that you may have questions about is the effect of the proceedings on your home. The answer lies in the type of bankruptcy, among other factors. It’s smart to talk to a San Diego bankruptcy lawyer for details, but some general information should help you understand these cases.


How Bankruptcy Affects The Sale Of Your Home

Chapter 7 v. Chapter 13 Bankruptcy

Chapter 7 bankruptcy is a total wipeout of many of your debts, subject to some exceptions. When the proceedings are over, you’ll walk away debt-free; however, there will be negative history on your credit rating for several years. Under some circumstances, you may be forced to sell some assets by the bankruptcy trustee overseeing the case. Whether your assets are suitable for liquidation depends on the type of property it is, i.e., your home, car, investment accounts, or other real or personal assets.

A Chapter 13 bankruptcy is structured as a repayment plan instead of a wipeout of your debt. During the proceedings, you’ll file a plan with the court demonstrating how you’ll pay your creditors; some will be fully paid, while others may receive partial payment or none at all – based upon what you can afford. Again, your credit rating will be impacted by filing this type of bankruptcy



Your Home & Mortgage Under Chapter 7 Rules

To understand how Chapter 7 bankruptcy affects your home, it’s important to know the distinction between your home loan and a lien in the mortgage agreement. A lender provides you a loan when it approves your mortgage application. This is money they’re loaning to you to buy real estate. The mortgage agreement also provides for a lien on the real estate you purchased. Essentially, the lien is the lender’s right in the property that exists until the loan is fully paid.

So in Chapter 7 bankruptcy, you may be able to get the court to discharge your loan; you’ll no longer be required to pay it, but the lien remains effective. Therefore, the lender can still pursue its lien rights on the home, but not you personally. If you opt for Chapter 7 to handle your debt, you should do everything you can to keep paying your mortgage in full.


Chapter 13 Bankruptcy Impact on Your Home & Mortgage

In Chapter 13 proceedings, you will not lose your home because it’s included in the plan you develop to pay back your creditors. There is an automatic stay as soon as you file for bankruptcy, so creditors cannot pursue you for payment and the lender cannot foreclose your home.


Mortgage Debt Relief in San Diego

As you can see, both Chapter 7 and Chapter 13 bankruptcy proceedings impact the sale of your home. These cases are extremely complex, as they involve numerous laws and rules that only someone with an extensive legal background can understand. If you’re considering bankruptcy, it’s wise to retain an attorney to handle you case and ensure that your legal rights are protected. Contact a San Diego bankruptcy lawyer for more information or with any questions.

Daniel R. Gamez, an attorney focusing exclusively in debt settlement, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in La Jolla, CA. For more information, please contact Daniel Gamez at 858-217-5051, daniel@gamezlawfirm.com or visit gamezlawfirm.com.