Chapter 13 Bankruptcy | Surrendering Home?
Chapter 13 Bankruptcy . It used to be that people filed for Chapter 13 bankruptcy because they wanted to prevent their home from being foreclosed on. It gave them ample time to correct any outstanding arrears on their mortgage. However, more individuals are actually making the decision to let their house go and start over due to a decline in house values. If your goal is to let your home go, you might want to consider going with a Chapter 7 bankruptcy. However, there are certain requirements that have to be met to be eligible for a Chapter 7.
Individuals with too much income or a previous Chapter 7 bankruptcy case within the last eight years could find that a Chapter 13 is the better option for them. This works well for those who have a priority debt that they don’t want to liquidate. Or this may be a solution for those who are looking to reorganize secured debts like vehicles and recreational toys.
Many states are considered recourse jurisdictions, meaning the mortgage company can end up coming after the borrower when there is a deficiency remaining after the home is sold at foreclosure. It used to be that homeowners were able to walk away from their mortgage without having to pay a dime. That isn’t the case today. Many banks are submitting bids for less than the full value of the home, leaving the borrower with money left to pay.
Bankruptcy is aimed at helping borrowers to resolve their debt. A Chapter 7 bankruptcy allows individuals to walk away with a clean slate, while a Chapter 13 helps debtors to reorganize their debt, give their credit a boost and even balance their budget.
Resolving or Discharging Outstanding Debt
Creditors are allowed to file a claim when the collateral’s value is for less than what the claim is. The main key of the plan is ensuring that debts provided for in your bankruptcy plan are effective enough to eliminate any indebtedness. Plans that are silent in regards to the possible unsecured claim are often insufficient and cause confusion.
Divesting Yourself of Responsibility for the Property
Many debtors assume that filing a Chapter 13 bankruptcy allows them to wash their hands of any debt associated with the property. Even with a confirmed Chapter 13 plan where you are offering to surrender collateral. This doesn’t necessarily mean you can legally walk away from any responsibility of the property. It’s important that you know that filing this particular form of bankruptcy and deciding to surrender the property doesn’t mean you can simply stop maintaining the property and walk away. You still have to take care of it properly.
To avoid a few of the common pitfalls stemming from surrendering property in a chapter 13 bankruptcy plan, you can implement some of the following suggestions.
Create a separate classification within your plan for any property that you plan on surrendering. Name the creditor, details surrounding how you are going to treat the debt and the collateral in question.
Any property should be surrendered to the original creditor in accordance with their secured claim. If an unsecured claim exists, the creditor shall be treated as an unsecured creditor.
The property needs to be surrendered to the original creditor. If there is any deficiency in relation to the creditors rights out of bankruptcy, it will be addressed as an unsecured claim and possibly discharged.
The collateral is to be surrendered to the original creditor to satisfy any outstanding debts.
Don’t Forget the Required Bankruptcy Certificates
Whether you and your bankruptcy attorney decide you should file for a Chapter 7 or Chapter 13 bankruptcy, you will still be required by law to complete Credit Counseling before filing and Debtor Education after filing but before debts can be discharged. You can usually fulfill these requirements online or by phone and upon completion, you’ll receive a bankruptcy certificate to be included with your case. – blog.startfresthtoday.com
Call attorney David Pinkston for a free consultation today: (904) 389-5880. If you are thinking about #bankruptcy, #chapter13bankruptcy or #foreclosure in the Jacksonville, Florida area, you should call attorney David Pinkston. David is very experienced with all aspects of bankruptcy law yet very personable and easy to talk to. Call Us Today! (904) 389-5880