How Do We Deal With Mortgage Loans?

One of a client's first concerns is whether or not he or she will lose a house after filing.

A mortgage is considered secured debt, as there is collateral attached to the debt. Secured debt, like a mortgage, is bit more complicated through bankruptcy than unsecured debt. After filing for bankruptcy, unsecured debt is either discharged immediately (Chapter 7) or following the successful completion of a repayment plan (Chapter 13). Secured debt, however, is not as simple.

How Do We Deal With Mortgage Loans?

Typically, a mortgage loan is handled differently in Chapter 7 and Chapter 13:

  • Chapter 7: In a Chapter 7 bankruptcy, the options involving your mortgage are limited. If you elect to surrender (walk away from) the home, then your liability on the debt can be discharged. If you want to keep your home, you must maintain your payments. If there is enough equity built up in the home, we can work to execute a reaffirmation agreement with the lender.
  • Chapter 13: In a Chapter 13 bankruptcy, our goal is to cure any mortgage arrears (to catch you up on any past due payments). Depending on the equity calculation, we can work to strip off a second mortgage or junior lien. Additionally, we might be able to cram down investment properties to present fair market value.

Most people have a lot of good questions about how their mortgage will be handled in bankruptcy. With these options, there are all sorts of caveats and technical terms. At Billbusters, Ledford, Wu & Borges, LLC, our Illinois bankruptcy attorneys have extensive experience helping clients through the process of filing for bankruptcy.

We can explain your rights and options in clear, simple terms during our free initial consultation. We will also ask you questions to get a full understanding of your goals and paths forward — and whether keeping your home is an important goal for you.

Contact Any of Our Chicago Area Offices

Learn more about how to handle mortgage loans. Call 312-651-4200 or contact our offices by e-mail to discuss your options during a No Obligation Consultation with an attorney.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.