Including a Mortgage in Bankruptcy DOES NOT Affect Home Ownership?
I have written several articles about how bankruptcy, short sale, foreclosure or deed in lieu of foreclosure will affect your ability to buy again.
Between the lack of information and the amount of misinformation out there about this topic, I am not surprised at all about the confusion around this topic.
There are a few questions and comments that continually come up that really concern me. One of the most common is about including a mortgage in bankruptcy.
Myth: Including a mortgage in Bankruptcy means I don’t own my home?
Including a mortgage in bankruptcy simply means that you cannot be held financially accountable for default on a mortgage. It does not mean you do not owe the mortgage any longer.
You are still on title to the home, you are still the owner of the home. When you took out the loan against your home, the lender created a lien against title of the home. What this basically means is that should you default on the financial obligation to pay back the home loan, the lender has the ability to reclaim the collateral (home) a through the foreclosure process.
The foreclosure process is a method for removing you from the title of the property (taking away ownership) and giving that ownership to the bank, which can then sell the home in an effort to recuperate the money they lent you.
You are still on title, you are still the owner of the home, you are still financially responsible for the home loan IF you intend to keep the home.
Keeping Your Home After Bankruptcy
In order to keep your home after a bankruptcy, you simply need to continue to make your payments on time. Having bankruptcy protection will not affect the terms of your home loan, the payments of your home loan, or the fact that you need to make those payments on time if you choose to keep the home.
It is quite likely that your lender will stop reporting your payments to the credit bureaus and you mortgage will say “included in bankruptcy” – or something to similar to that.
This does not mean that you no longer have a mortgage payment, it simply means that the lender stopped reporting the payments. In the future, should you want to buy again, the lender will order a payment history from your lender to verify that your payments are made on time.
All Credit Problems are Temporary
Filing for bankruptcy is one of the most temporary in terms of when a mortgage lender will allow you to borrow money to buy another home.
Simply including your mortgage loan in bankruptcy really is not that big of a deal. It seems like it, but it’s really not.
What you do with the home and whether or not you continue to make your house payments on time WILL affect ownership and your ability to buy again sooner.
If you have questions, comments or experiences you would like to share – please do so below. You can send a private message or leave a public comment.
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