A New York resident who is currently going through a bankruptcy or someone who is considering bankruptcy as an option may want to know if they can walk away from a home during the proceedings. While it is sometimes possible to do so, there are many considerations homeowners who are in bankruptcy need to take into account before they can stop making their mortgage payments, including the type of bankruptcy that is involved.
If the debtor has filed for Chapter 13 and the mortgage is included in the payment plan, house payments must be made in accordance with the court-ordered schedule in order for a discharge to eventually be issued. An option that may not be obvious may be to convert from Chapter 13 to Chapter 7. This can allow an individual to have most unsecured debts discharged as well as give up their home. However, not everyone will be eligible for Chapter 7 as there is a maximum income requirement. Someone who cannot switch to a Chapter 7 bankruptcy may instead want to dismiss their case and deal with creditors directly.
If an individual’s income is too high for Chapter 7, they could also stay within the Chapter 13 bankruptcy and stop making mortgage payments, allowing the home to go into foreclosure. The time that it takes for the foreclosure process can vary depending upon the lender’s actions. The lender could take a longer time to remove the home from bankruptcy protection, for example, or they may try to offer a loan modification instead.
Someone who is considering switching from Chapter 13 to Chapter 7 bankruptcy or walking away from a home may wish to seek the advice of a bankruptcy lawyer. Legal counsel can often help their clients decide which option is the best for their needs.