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Giving up a home during Chapter 13 bankruptcy

Deciding to file bankruptcy is a serious life decision that is sometimes unavoidable. If you have decided to file Chapter 13 bankruptcy, you may have done so to save your home. When circumstances change, and you are unable to keep up with the required mortgage payments you must make under the Chapter 13 bankruptcy, you might wonder what you can do. Residents of Chicago should know that there are some options available that you can choose from if this situation occurs.

One of the options available for some homeowners who can't afford required mortgage payments for the bankruptcy is to see if a loan modification is available. When loan modification is used, delinquent payments on the mortgage are factored into the modification, so you essentially gain a fresh start with your mortgage since you are current when the loan modification is finalized.

In some cases, converting from a Chapter 13 bankruptcy to a Chapter 7 bankruptcy might be possible, depending on your eligibility. This depends on a variety of factors. Unlike a Chapter 13 bankruptcy, a Chapter 7 bankruptcy dismisses unsecured debt. Chapter 7 debt also enables you to keep your home, vehicles and other assets. This might give you enough room in the budget to keep up with the mortgage payments.

Finally, it is usually possible to just walk away from the home by just stopping the payments on the mortgage. Depending on the mortgage company, you might be offered a loan modification. Some mortgage companies might opt to simply proceed with a foreclosure. The length of time it takes to foreclose on a home in bankruptcy depends on several factors and will vary from one case to the next.

Making a decision to leave your home isn't easy. Understanding exactly how specific options can affect you is something that a Chicago bankruptcy attorney can help you determine.

Source: Fox Business, "Can I Walk Away From Home in Bankruptcy?" Justin Harelik, Dec. 11, 2013

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