Walking Away From Your Mortgage During BankruptcyMore and more debtors are becoming tired of the hassles they face when trying to modify their mortgage and more of them are deciding to file bankruptcy and walk away.

Things you should know before you walk away from your mortgage:

  1. There are no free rides.  Even if you file bankruptcy, you will not be able to remain in your home without paying the mortgage.  If you want to keep your home and have the income to do so, bankruptcy can provide you with an opportunity to work out a deal with your mortgage lender; but if you cannot pay, you will eventually need to surrender the home to the mortgage lender, even if you file bankruptcy.
  2. If you’re facing foreclosure on your home, bankruptcy will give you more time by stopping the lender from proceeding with the foreclosure process.  Using the automatic stay, which is applied to all of the debtor’s creditors, bankruptcy can stop a foreclosure in its tracks and give the homeowner more time to figure out their next move.
  3. Some mortgage lenders may be able to convince a judge to lift an automatic stay so that they can proceed with the foreclosure process. The mortgage lender may decide to do this if they know that you intend to surrender your home during the bankruptcy.
  4. If you are filing Chapter 7 bankruptcy and decide to surrender your home it should not be too complex to do.  But if you are an above median income debtor who is filing Chapter 13 bankruptcy and you want to surrender your home in bankruptcy, please discuss this carefully with your bankruptcy attorney.