What Happens to Your Mortgage During Texas Bankruptcy?
Filing for bankruptcy in Texas can be a significant financial decision, especially for those worried about their mortgage. Understanding how bankruptcy affects your mortgage is crucial for homeowners facing financial difficulties. This article explores the implications of filing for bankruptcy on your mortgage in Texas, along with the options available to you.
When you file for bankruptcy in Texas, two primary types of bankruptcy are available: Chapter 7 and Chapter 13. Each has different effects on your mortgage.
Chapter 7 Bankruptcy and Mortgage
Chapter 7 bankruptcy involves liquidating non-exempt assets to pay creditors. However, many individuals find that their home is exempt from this process under Texas law, which means they can keep their home as long as they continue making mortgage payments.
Upon filing for Chapter 7, an automatic stay is issued. This means that foreclosure actions must cease, allowing you a temporary reprieve from mortgage payments without immediate risk of losing your home. If you can make your payments during this period, you may be able to keep your property.
However, if you fall behind on mortgage payments, the lender may proceed with foreclosure after the bankruptcy case is closed. The implications of not making your payments can be severe, so it's essential to have a plan in place.
Chapter 13 Bankruptcy and Mortgage
Chapter 13 bankruptcy is often more favorable for those who want to keep their homes and catch up on missed mortgage payments. This type of bankruptcy allows you to create a repayment plan, which can last from three to five years, during which you can pay off your debts, including any mortgage arrears.
Similar to Chapter 7, an automatic stay is enacted upon filing for Chapter 13. This protection halts any ongoing foreclosure proceedings. You’ll need to propose a repayment plan to the bankruptcy court, which outlines how you intend to pay off your debts while maintaining your regular mortgage payments. Once the repayment plan is approved, you can work towards clearing any past due amounts.
Impact of Bankruptcy on Your Credit
Filing for bankruptcy will impact your credit score significantly. Chapter 7 bankruptcy can remain on your credit report for up to ten years, while Chapter 13 stays for seven years. However, many individuals find that they can start rebuilding their credit soon after completion of their repayment plan or bankruptcy discharge.
Consulting a Bankruptcy Attorney
Understanding the intricacies of bankruptcy law can be challenging. Therefore, consulting a bankruptcy attorney who specializes in Texas law is advisable. They can provide personalized advice and help you navigate the complex process while ensuring that you explore every available option regarding your mortgage.
Conclusion
In summary, filing for bankruptcy in Texas can significantly impact your mortgage. Whether you choose Chapter 7 or Chapter 13, understanding your options is key to retaining your home during this financial challenge. Taking prompt action and consulting with a professional can help you manage your mortgage and make informed decisions about your financial future.