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Keeping your home when you file Chapter 13 bankruptcy in Kentucky

One of the most frightening prospects of filing bankruptcy is the impact it can have on the assets you have acquired. For most people, their family home is the most important asset that they worry about losing in bankruptcy. For those who have substantial equity in their home, even if their income is currently low, Chapter 13 bankruptcy is usually a better option than Chapter 7.

Chapter 7 limits both your income and the assets you retain. Anything you own that does not receive an exemption is subject to liquidation or sale by the courts to pay your creditors. That could even include some of the equity you've built in your home.

In Chapter 13 bankruptcy, you do not need to worry about the liquidation of your assets. Instead, the courts will help you reorganize your debt so that you can make reasonable payments and start rebuilding your finances. During the Chapter 13 process, you will have the opportunity to reaffirm and potentially even renegotiate your mortgage. That can help you stay in your family home.

The importance of reaffirming your mortgage in Chapter 13 bankruptcy

When you initially file for bankruptcy, you receive an automatic stay that protects you from collection activity by creditors. For those who have already received notification of potential foreclosure proceedings, that automatic stay can stop foreclosure and help them stay in their home. However, you cannot indefinitely remain in the house without paying on your mortgage.

Chapter 13 provides an opportunity to negotiate better terms with your lender. Once you have reached better terms, you will need to reaffirm the mortgage debt secured by your home. Reaffirming the mortgage debt is usually a necessary part of the process if you hope to retain your home.

Doing so ensures that the lender's security claim on the home remains valid after your discharge. Once you reaffirm the mortgage and complete your repayment program as approved by the courts, the remaining unsecured debt you have gets discharged. You will still need to pay on your mortgage after discharge.

Renegotiating your mortgage is a smart decision in Chapter 13 proceedings

Most lenders would prefer to keep existing purchasers in the home instead of incurring the expense of foreclosure proceedings and then needing to arrange for the sale of the home. Working with an attorney who understands chapter 13 bankruptcy in Kentucky can help with the difficult process of negotiating better terms on your mortgage.

Reducing your payment, adding missed monthly payments to the mortgage to be repaid later or even adjusting your interest rate are all possible when you re-negotiate a mortgage as part of Chapter 13 proceedings.

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Law Office of Ginger C. Cord, PSC
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Lexington, KY 40507

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