How Can I Keep the House After the Chapter 7 Bankruptcy Discharges?

What happens to my house and credit after the Chapter 7 bankruptcy discharge? There are a few different answers to this question depending on the choice made during the bankruptcy. If the filer decided to reaffirm their property during the Chapter 7 bankruptcy, the filer retains the property as if the bankruptcy never happened. The payments made on the reaffirmed debt will be reported to the credit bureau helping the filer rebuild their credit.

Now, let's discuss the other option. What happens to my house and credit if the property is not reaffirmed? First, the filer can continue to live in the house as long as the monthly mortgage payment is made. Once all the payments are made and the debt is satisfied the bank or lien holder will release the lien. The drawback is for the filer who did not reaffirm the debt and trying to rebuild their credit. The mortgage payments made after the discharge is granted will not be reported to the credit bureau.

The advantage for the filer is they can stop making payments at any time and walk away from the property. This is important to understand because the debt was discharged through the bankruptcy. If the filer continues to make payments on the house and one day decides to leave. The banks will not be able to take any future against that individual because the debt has already discharged through the bankruptcy process.

The next scenario has to do with the foreclosure process. What happens if the filer decided not to reaffirm the debt and they stop making the monthly payment? Once the banks stop receiving the monthly payment, the foreclosure process will begin. The foreclosure process is different in each state. The paperwork required in filing a foreclosure and the amount of time to complete the process varies in each state.

In some states, the foreclosure process may take years to complete. Banks are slow in processing foreclosures for a number of reasons:

1. The loan servicing industry has become strictly regulated.

2. Banks have been issued consent orders from judges and regulators, stopping or slowing the foreclosure process.

3. Homeowners are legally challenging the foreclosure filing by filing motions to delay the foreclosure.

4. The loan modification process can slow down the foreclosure process.

5. Homeowners are filing bankruptcy to stop the foreclosure process.
Speak to legal counsel when considering reaffirming a property in a Chapter 7 bankruptcy. There are a number of options available to a filer, depending on your individual financial situation. Understanding each option will help you in the decision making process.

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