If I had a dollar for every time that I was asked this question, I would be retired and spending my days on a sunny beach. The easy answer to this question is “it depends.” If you are current on your payments to the mortgage company and continue making timely payments after your bankruptcy case is filed, then you do not need to worry about “losing” your home in a foreclosure action.
The mortgage company may ask you to sign a reaffirmation agreement on the loan after you file bankruptcy. A reaffirmation agreement is basically just a promise (new contract) by you to pay a debt after the bankruptcy is completed. However, even if a reaffirmation agreement is not filed with the bankruptcy court it does NOT mean that you are automatically going to lose your house. As long as the mortgage company is receiving their payment every month, more than likely they are going to be placated and content.
However, I advise all my clients to keep accurate records and accounts of all payments made to the mortgage company after your bankruptcy case is over. You want to make sure that the mortgage company is reporting your timely payments to the credit bureaus so that you can repair your credit score. There are some mortgage companies and banks out there who will no longer report the payments made to the credit bureau agencies after a bankruptcy filing even with a reaffirmation agreement on file. If you find yourself in this predicament, you are going to want to refinance your loan with another banking institution as soon as you are eligible to do so.
For those of you who are reading this and starting to freak out because you are several months behind in your payments on your house, rest assured! All hope is not lost – there are ways to ward off the inevitable foreclosure action. There is a particular bankruptcy petition tailored to your needs! It is a Chapter 13 bankruptcy and it is a repayment plan that allows you to pay a portion (or all) of your debts over a period of time. One of the main reasons my clients file a Chapter 13 bankruptcy is due to the fact that they are behind on their mortgage payments, the mortgage company has refused to take any further funds from the borrowers, and foreclosure proceedings have been started.
A Chapter 13 bankruptcy allows the debtor(s) to pay the arrearage owed on their home through the Chapter 13 plan. This is a very basic and generalized summary of a Chapter 13 but the process is actually quite involved and is dependent upon a variety of factors. If you are in this type of situation, I HIGHLY recommend meeting with an experienced Chapter 13 bankruptcy attorney to assess your particular situation and determine the options that are best for you.