Your Mortgage & Chapter 7 Bankruptcy - Sasser Law Firm - North Carolina (2023)

Your Mortgage & Chapter 7 Bankruptcy - Sasser Law Firm - North Carolina (1)

If you are struggling under the weight of crippling debt, bankruptcy might be the right option for you to clear your financial obligations and start again with a clean slate. Furthermore, if you are considering filing for Chapter 7 bankruptcy and you own a home, there are some important considerations to make before moving forward. Not properly protecting your assets could leave your property – and even your home – vulnerable to being sold to pay off creditors.

Sasser Law Firm can guide you through this process. Our board-certified bankruptcy attorneys have experience with even the most difficult bankruptcy cases. We are prepared to fight through appeals if necessary.

Our bankruptcy attorneys have extensive experience helping clients facing emergencies like foreclosure or repossession get back on the right track. Contact us for a free consultation now. There is no obligation to move forward with our firm until you are ready.

How a Lawyer Can Help With Your Home and Mortgage During Bankruptcy

Bankruptcy is a somewhat complex legal process. Owning a home can often make the situation more complicated. First, you must pass a means test for median family income to presumptively qualify for a Chapter 7 discharge. This means that you will not be allowed to file for bankruptcy if you are deemed financially able to pay back your debts. You also have more limited options if you’ve filed for bankruptcy in the past.

The law considers the assets of a Chapter 7 debtor to be usable for paying debts. North Carolina law exempts some of these assets from being sold by the Chapter 7 trustee, including a portion of the value of a motor vehicle, an amount of clothing and household goods, retirement accounts, certain types of legal compensation, alimony and child support, and certain other personal property, as well as a portion of the value of your home, if you use it as a personal residence. If a debtor moved to North Carolina less than two years prior to the filing of the bankruptcy case then it may be that the exemptions of another state or those found in the bankruptcy code will be applicable instead. Although many people are concerned about what bankruptcy will mean for their future, it does not mean that you will lose all your property if you protect it correctly.Your Mortgage & Chapter 7 Bankruptcy - Sasser Law Firm - North Carolina (2)

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An attorney like the knowledgeable bankruptcy lawyers at Sasser Law Firm can help you get your financial affairs in order, which is essential before going into bankruptcy proceedings. Property that is not covered under the state exemptions may be considered assets and subject to sale. If you do it properly and timely, however, your assets, as well as your home, can be protected.

Can Any Form of Bankruptcy Allow You to Keep Your Home in North Carolina?

When considering bankruptcy, you are likely concerned about whether you’ll be able to keep your home. Thankfully, North Carolina law allows you to protect your home from foreclosure.

Chapter 7 bankruptcy will allow you to keep your home if your equity is below the following limits:

  • North Carolina law provides a homestead exemption, which exempts $35,000 of equity in a personal residence, or $60,000 if you are 65 years of age or older, your spouse has died, and certain other conditions are met.
  • Married couples are able to double the $35,000 exemption, to protect $70,000 of equity. Bankruptcy filers in North Carolina are unable to use the bankruptcy code exemptions if they have lived in North Carolina for at least 2 years.
  • North Carolina has a Wildcard provision, however, which allows a homeowner to use any unused portion of their homestead exemption to protect other property, up to $5,000.
  • Tenancy by Entirety permits an exemption in real property owned and titled by spouses so long as the spouses do not owe joint, unsecured debt. Tenancy by Entirety is not limited to residences. Medical bills are generally considered to be joint obligations.

For example: This means that if your mortgage debt on a $200,000 home is $165,000 (or $130,000 for a married couple), your equity would be $35,000 ($70,000 for a married couple), and would be covered by the homestead exemption. In this example, your home would be protected. Ideally, you will be current or close to current on your mortgage payments and other debts like homeowner’s insurance and property taxes in order to file for Chapter 7 bankruptcy. The reason is that Chapter 7 will not help a debtor with mortgage delinquency or property tax delinquency.

Chapter 13 bankruptcy may be a better option if you aren’t able to catch up on your payments. This form of bankruptcy provides a repayment plan, which would allow you to make missed payments over time along with your normal monthly payments. Also, if you have non-exempt equity in the property you are still permitted to retain that in Chapter 13.

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Secured Debt vs. Liens

What You Need to Know When Filing Chapter 7 Bankruptcy

A secured debt allows a creditor to take a borrower’s property if the debt is not paid. Credit cards and utility bills are unsecured debt unless the creditor obtains a judgment against the debtor in which case that judgment may create a lien on real property. Mortgage loans are secured debt. If you fail to pay your mortgage, a creditor can foreclose on your house.

A lien allows the creditor to foreclose or repossess on the collateral if the borrower defaults on the loan.

A lien may also give a lienholder the right to be paid before other creditors in bankruptcy. If a trustee in a Chapter 7 case sells property with a lien on it, they may have to pay a secured creditor before they pay other creditors. If there are multiple liens on a property, the earliest lien is paid first.

Do I Need to Pay My Mortgage If I File Chapter 7 Bankruptcy?

Yes, you still need to make your mortgage payments if you file for bankruptcy. Ideally, you would be current or close to current on your mortgage before filing for Chapter 7 bankruptcy.

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If you’re not current on your payments but are also not too far behind, you may be able to catch up on the back payments while making your regular payments, and still file Chapter 7. Chapter 13 bankruptcy takes longer, but it may work better for you if you need more time to catch up.

Bankruptcy can relieve you of the debt on your house, but not of a mortgage lien that allows the creditor to foreclose. If you file for bankruptcy and do not make your mortgage payments, you may still lose your home.

Can I Get a Mortgage After Bankruptcy?

Yes. Bankruptcy does not have to hold you back for a long time. In most cases, you will need to wait two years after your bankruptcy discharges before you can get a conventional mortgage loan. Note that the discharge date is not the date you filed for bankruptcy. It can take four to six months or longer, depending on whether your assets are protected, for a bankruptcy to discharge.

When getting another mortgage, you should check your credit reports to be sure that your discharged debt has all been included in your bankruptcy. Getting pre-qualified for a loan can save you trouble as well and will make the process smoother. You may want to get a Federal Housing Administration (FHA)-backed loan, but the waiting period may be longer than a normal loan, depending on the lending institution’s requirements.

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Can I Use a Reverse Mortgage in Filing Chapter 7 Bankruptcy?

If you are 62 years of age or older, you could qualify for a reverse mortgage, which is a loan on the equity in your home through which you could receive funds in a lump sum, in regular monthly payments, or with a line of credit.

Your reverse mortgage loan documents may prohibit you from accessing your home’s equity. You may need to sign a reaffirmation agreement in order to continue to receive distribution payments.

Sasser Law Firm Can Help With Your Bankruptcy

Going through bankruptcy can be somewhat difficult and stressful. You’re worried about your finances and whether you can navigate the legal and financial requirements while trying to maintain everything else in your life. You need an advocate on your side who is committed to guiding you through this process.

At Sasser Law Firm, we understand the stress you’re facing and that you may not know where to turn for help. We have extensive experience in North Carolina bankruptcy law, with Chapter 7, Chapter 11, and Chapter 13 cases. We’ve handled over 8,500 cases between personal bankruptcy and business bankruptcy. We understand each individual’s situation is unique. You won’t be passed off to a paralegal. You’ll work directly with one of our attorneys, who can answer questions about your case.

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Call us today or fill out our contact form for a free, no-obligation consultation.

FAQs

Can mortgage debt be discharged in Chapter 7? ›

A Chapter 7 bankruptcy wipes out your financial debt, including your mortgage, but you could lose your house. A Chapter 13 bankruptcy is more of a reorganization, and you can even catch up on payments as long as these are included in your plan.

How much does a bankruptcy lawyer cost in NC? ›

Chapter 11 Fees
Attorney fee (paid either before or after filing)$10,000-$25,000
Filing fee to bankruptcy court$1,738
Mandatory credit counseling course fee (if the debtor is an individual)$25
Quarterly fees paid to the bankruptcy courtStarting at $325

What assets can be seized in Chapter 7? ›

Motor vehicles, up to a certain value. Reasonably necessary clothing. Reasonably necessary household goods and furnishings. Household appliances.

What debts are not forgiven under Chapter 7? ›

Non-dischargeable Debts

Some examples of debts that are typically not forgiven by Chapter 7 bankruptcy include the following: Student loans. Child support or alimony payments. Some taxes you owe.

Can a mortgage be forgiven in bankruptcies? ›

So, support for keeping your home during bankruptcy exists. On the other hand, paying off debt is an obligation, and there's no “free house” option that comes with it. No bankruptcy action forgives a primary mortgage. The bottom line is that if you want to stay in your house, you still have to pay your mortgage.

Can I walk away from my mortgage after Chapter 7? ›

Although Chapter 7 bankruptcy gets rid of your personal liability on your mortgage, the lender can still foreclose if you stop paying. Filing for Chapter 7 bankruptcy will wipe out your mortgage obligation.

How much will my bankruptcy cost? ›

The cost of bankruptcy can be calculated by multiplying the probability of bankruptcy by its expected overall cost. Bankruptcy costs vary depending on the structure and size of the company.

How much does a bankruptcy petition cost? ›

What does it cost? The costs of bankrupting yourself are largely costs payable to the adjudicator and to the official receiver who will deal with your bankruptcy after the event. Currently the adjudicator's fees are £130, and the Official Receiver's deposit is £550.

What is Chapter 7 bankruptcy in North Carolina? ›

Chapter 7 bankruptcy is also known as liquidation. This means a trustee will sell your non-exempt assets to pay off as much of your debt as possible. However, that does not mean you will lose everything. North Carolina law is generous in allowing property exemptions in Chapter 7 bankruptcy cases.

What do you lose when filing Chapter 7? ›

Chapter 7 bankruptcy erases or "discharges" credit card balances, medical bills, past-due rent payments, payday loans, overdue cellphone and utility bills, car loan balances, and even home mortgages in as little as four months. But not all obligations go away in Chapter 7.

What is not covered in Chapter 7? ›

Debts Never Discharged in Bankruptcy

Alimony and child support. Certain unpaid taxes, such as tax liens. However, some federal, state, and local taxes may be eligible for discharge if they date back several years. Debts for willful and malicious injury to another person or property.

Can Chapter 7 fall off after 7 years? ›

A Chapter 7 bankruptcy can stay on your credit report for up to 10 years from the date the bankruptcy was filed, while a Chapter 13 bankruptcy will fall off your report seven years after the filing date. After the allotted seven or 10 years, the bankruptcy will automatically fall off your credit report.

Do creditors ever object to Chapter 7? ›

In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor's discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee.

What is the #1 reason for bankruptcies? ›

Medical Costs

So many people fall behind on their medical bills, it accounts for 62% of all bankruptcies. In fact, the majority of bankruptcy filings related to medical bills came from individuals with health insurance!

Are taxes forgiven in Chapter 7? ›

You can wipe out or discharge tax debt by filing Chapter 7 bankruptcy only if all of the following conditions are met: The debt is federal or state income tax debt. Other taxes, such as fraud penalties or payroll taxes, cannot be eliminated through bankruptcy.

Is the mortgage forgiveness Act still in effect? ›

Extension of the Mortgage Debt Relief Act

The CAA extends the exclusion of cancelled qualified mortgage debt from income for tax years 2021 through 2025. However, the maximum amount of excluded forgiven debt is limited to $750,000.

How long do you have to reaffirm a mortgage? ›

If you want to file a reaffirmation agreement, you need to do so within 60 days of the first date of the meeting of creditors. Once you submit it, it must be accepted by the creditor.

How can I legally get rid of my mortgage? ›

Here's a look at seven different ways to get out of a mortgage.
  1. Sell Your House. ...
  2. Turn Over Ownership to Your Lender. ...
  3. Let the Lender Seek Foreclosure. ...
  4. Seek a Short Sale. ...
  5. Rent Out Your Home. ...
  6. Ask for a Loan Modification. ...
  7. Just Walk Away.
22 Feb 2021

How long can I stay in the house after Chapter 7? ›

In conclusion, you will typically have about 60 days and all the way up to 1 year after filing the bankruptcy before you have to leave the home.

Do I still own my home after Chapter 7? ›

Do you lose your house in bankruptcy? If you do not have significant home equity and the mortgage on your home is still current, you will not lose your house if you file for Chapter 7 bankruptcy. Most people who file Chapter 7 bankruptcy are able to retain all of their assets, which can include your house.

Can Chapter 7 be removed early? ›

Chapter 7 bankruptcy stays on your credit report for 10 years. There's no way to remove a bankruptcy filing from your credit report early if the information is accurate. Bankruptcy will hurt your credit at first, but the effect will lessen over time.

How much money is too much for Chapter 7? ›

If your annual income, as calculated on line 12b, is less than $84,952, you may qualify to file Chapter 7 bankruptcy. If it's greater than $84,952, you'll have to continue to Form 122A-2, which we'll review in the next section.

Is it worth going bankruptcy? ›

If your wages are being garnished or credit card companies and payday lenders are harassing you to collect payments you can't afford to pay, filing bankruptcy may be the best way to get permanent relief. But if most of your debts are non-dischargeable, filing bankruptcy may not be worth it.

Is Chapter 7 or 11 bankruptcy better? ›

Key Takeaways. Chapter 11 bankruptcy is a business reorganization plan, often used by large businesses to help them stay active while repaying creditors. Chapter 7 bankruptcy doesn't require a repayment plan but does require you to liquidate or sell nonexempt assets to pay back creditors.

How do I defend my bankruptcy petition? ›

The procedure to oppose a bankruptcy petition is to file a witness statement in opposition in court not less than five business days before the date of the hearing of the petition (rule 4.18(1), Insolvency Rules).

Can I get help to pay for bankruptcies? ›

Speak to your local Citizens' Advice Bureau (CAB)

It would also be worth contacting your local Citizens' Advice Bureau. They may know if there are any local funds that you can apply to, to help with bankruptcy fees.

Does bankruptcy clear all debts? ›

Bankruptcy does not release you from all debts

Most unsecured debts are covered in bankruptcy - this means you no longer have to repay these debts. There are some exceptions.

How much equity can I have in my home and still file Chapter 7 in NC? ›

Chapter 7 bankruptcy will allow you to keep your home if your equity is below the following limits: North Carolina law provides a homestead exemption, which exempts $35,000 of equity in a personal residence, or $60,000 if you are 65 years of age or older, your spouse has died, and certain other conditions are met.

How long does it take file Chapter 7 in NC? ›

The standard answer is that most Greensboro Chapter 7 bankruptcy cases take between 4-6 months to wrap up. Without complications or other delays, there is the potential to be done in less than four months. Most cases are discharged within six months of the filing date.

What assets are exempt from creditors in North Carolina? ›

Common North Carolina Bankruptcy Exemptions
  • North Carolina's Homestead Exemption. The homestead exemption protects equity in your home. ...
  • North Carolina's Motor Vehicle Exemption. ...
  • Other Personal Property. ...
  • Wages. ...
  • Retirement and Pensions. ...
  • Public Benefits. ...
  • Insurance. ...
  • Alimony, Child Support, and Separate Maintenance.

Will I lose my income tax refund in Chapter 7? ›

Federal Tax Refunds During Bankruptcy

You can receive tax refunds while in bankruptcy. However, refunds may be subject to delay, to turnover requests by the Chapter 7 Trustee, or used to pay down your tax debts.

Can I spend money after filing Chapter 7? ›

The money you make after the filing date should first be used to make your monthly plan payment to the Trustee. After that, your money is yours to do with as you please, up to a point: if you need to make a large purchase such as a car or a house, you might need the court's permission. Consult with your attorney.

How does Chapter 7 affect your life? ›

You'll still have to pay court-ordered alimony and child support, taxes, and student loans. The consequences of a Chapter 7 bankruptcy are significant: you will likely lose property, and the negative bankruptcy information will remain on your credit report for ten years after the filing date.

Does Chapter 7 wipe out credit card debt? ›

Credit Card Debt in Chapter 7 Bankruptcy

Chapter 7 bankruptcy will discharge (wipe out) most or all unsecured, nonpriority debt. Medical bills, personal loans, and most credit card debt are typical examples of unsecured, nonpriority debt you can wipe out in bankruptcy.

What would disqualify me from Chapter 7? ›

5 Reasons Your Bankruptcy Case Could Be Denied

The debtor failed to attend credit counseling. Their income, expenses, and debt would allow for a Chapter 13 filing. The debtor attempted to defraud creditors or the bankruptcy court. A previous debt was discharged within the past eight years under Chapter 7.

How much will my credit score go up after Chapter 7 falls off? ›

How Much Will Your Credit Score Increase After Chapter 7 Falls Off Your Credit Report? When a chapter 7 falls off your report, you can expect a boost of around 50–150 points on your credit score.

How long does it take to rebuild credit after Chapter 7? ›

Most experts say it will take 18 to 24 months before a consumer with re-established good credit can secure a mortgage loan after discharge from personal bankruptcy.

How long is credit bad after Chapter 7? ›

Since your credit score is based on the information listed on your credit reports, the bankruptcy will impact your score until it is removed. This means a Chapter 7 bankruptcy will impact your score for up to 10 years while a Chapter 13 bankruptcy will impact your score for up to seven years.

Can a creditor come after you after Chapter 7? ›

Can a debt collector try to collect on a debt that was discharged in bankruptcy? Debt collectors cannot try to collect on debts that were discharged in bankruptcy. Also, if you file for bankruptcy, debt collectors are not allowed to continue collection activities while the bankruptcy case is pending in court.

What debts are forgiven in Chapter 7? ›

A Chapter 7 bankruptcy will generally discharge your unsecured debts, such as credit card debt, medical bills and unsecured personal loans. The court will discharge these debts at the end of the process, generally about four to six months after you start.

What questions do they ask at a 341 meeting? ›

341 Meeting Questions the Bankruptcy Trustee Might Ask
  • Do you own or have any interest whatsoever in any real estate?
  • Have you made any transfers of any property or given any property away within the last one-year period (or such longer period as applicable under state law)?
  • Does anyone hold property belonging to you?

Who ultimately pays for bankruptcies? ›

So Who Actually Pays for Bankruptcies? The person who files for bankruptcy is typically the one that pays the court filing fee, which partially funds the court system and related aspects of bankruptcy cases. Individuals who earn less than 150% of the federal poverty guidelines can ask to have the fee waived.

Are bankruptcies on the rise in 2022? ›

The 20 bankruptcies in 1H 2022 were the lowest midyear total since the second half of 2014. Looking ahead, however, there are some concerns that increased corporate debt levels, rising interest rates and inflation, and a potential global recession may contribute to an increase in bankruptcy filings.

Why is Chapter 7 better than 13? ›

The biggest difference between Chapter 7 and Chapter 13 is that Chapter 7 focuses on discharging (getting rid of) unsecured debt such as credit cards, personal loans and medical bills while Chapter 13 allows you to catch up on secured debts like your home or your car while also discharging unsecured debt.

Can a mortgage be forgiven under Chapter 7? ›

A Chapter 7 bankruptcy wipes out your financial debt, including your mortgage, but you could lose your house. A Chapter 13 bankruptcy is more of a reorganization, and you can even catch up on payments as long as these are included in your plan.

Can the trustee take my tax refund after filing Chapter 7? ›

Tax refunds can become complicated during a Chapter 7 bankruptcy. However, the bottom line is that your bankruptcy trustee will likely take a portion or all of your annual tax refund as part of the bankruptcy estate and use it to pay your creditors.

What does it mean to discharge personal liability on a mortgage? ›

Discharging Debt Under Chapter 13

If the debtor receives a discharge but remains in possession of the property despite an intent to surrender in the confirmed plan, the debtor is discharged of personal liability.

What happens to my house after Chapter 7? ›

Your Home and the Chapter 7 Bankruptcy Trustee

After filing for Chapter 7, your property will go into a bankruptcy estate held by the Chapter 7 bankruptcy trustee appointed to your case. The trustee will sell property in the estate for the benefit of creditors. However, you don't lose everything you own.

Does it cost to discharge a mortgage? ›

The total cost of processing the discharge of mortgage can be up to $350-1,000, depending on when the property is sold and where it's located. The fees you'll likely be asked to pay may include: Administration or discharge fee charged by your lender. Any interest or penalty interest due.

Can Chapter 7 be removed from credit before 10 years? ›

Chapter 7 bankruptcy stays on your credit report for 10 years. There's no way to remove a bankruptcy filing from your credit report early if the information is accurate. Bankruptcy will hurt your credit at first, but the effect will lessen over time.

Who is responsible for discharging a mortgage? ›

You, your lawyer or your notary must discharge the mortgage and add your new lender to your property's title. Some lenders charge other fees, including assignment fees when you switch to another lender. Ask your new lender if they will cover the costs of a mortgage discharge.

Who gets paid first in Chapter 7? ›

Chapter 7 bankruptcy allows liquidation of assets to pay creditors. Unsecured priority debt is paid first in a Chapter 7, after which comes secured debt and then nonpriority unsecured debt. Filing Chapter 7 typically involves completing forms and a review of assets by the trustee.

Does Chapter 7 clear your credit? ›

Since your credit score is based on the information listed on your credit reports, the bankruptcy will impact your score until it is removed. This means a Chapter 7 bankruptcy will impact your score for up to 10 years while a Chapter 13 bankruptcy will impact your score for up to seven years.

What happens if you don't reaffirm your mortgage? ›

Without a reaffirmation agreement, you are not personally liable for the debt. So, while the mortgage company can still foreclose on their lien if you don't pay, you are free to walk away with no penalty or further damage to your credit.

How can I save my home after filing Chapter 7? ›

Most Chapter 7 bankruptcy filers can keep a home if they're current on their mortgage payments and don't have much equity. However, it's likely that a debtor will lose the home in a Chapter 7 bankruptcy if there's significant equity that the trustee can use to pay creditors.

What do you lose when you file Chapter 7? ›

Chapter 7 bankruptcy erases or "discharges" credit card balances, medical bills, past-due rent payments, payday loans, overdue cellphone and utility bills, car loan balances, and even home mortgages in as little as four months.

How long does it take for Chapter 7 to fall off? ›

When is bankruptcy removed from your credit report? A Chapter 7 bankruptcy can stay on your credit report for up to 10 years from the date the bankruptcy was filed, while a Chapter 13 bankruptcy will fall off your report seven years after the filing date.

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