Personal bankruptcy is a legal process that allows people to get out of debt. When you file for bankruptcy in Connecticut, a bankruptcy proceeding will be opened. The purpose of the proceeding is to determine whether you can keep your property or whether it will be sold to pay off your creditors. The bankruptcy proceeding also gives you a fresh start by discharging most of your debts.
One thing many people who face bankruptcy worry about is holding onto their homes. They’re afraid that agreeing to bankruptcy means that they’ll lose everything. In fact, bankruptcy may actually help you keep your home.
What types of bankruptcy are there?
Consumers either file Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is commonly referred to as “liquidation” bankruptcy. In a Chapter 7 bankruptcy, you may be able to keep some of your property, but most of your assets will be sold off, or “liquidated,” to pay your creditors. After your debts are paid, the rest of your debt is discharged.
Chapter 13 bankruptcy is also known as “reorganization” bankruptcy. In a Chapter 13 bankruptcy, you do not have to sell any of your property. Instead, you reorganize your debt and make payments to your creditors over time. Once the payment plan has finished, any remaining debt is discharged. You can even make arrangements to catch up on missed or late mortgage payments.
Can bankruptcy help you keep your home?
If your home mortgage is affected by bankruptcy, you may be able to keep your home. Chapter 13 bankruptcy is structured in a way that allows you to keep your home while Chapter 7 is set up to get rid of your other debts, allowing you to focus on your home payments.
In most instances, the mortgage company will work with you to create a payment plan that is affordable for you. If you are unable to make the payments, the mortgage company may foreclose on your home. However, if you file for bankruptcy, the automatic stay could stop the foreclosure process.
Filing for bankruptcy may help you stay in your home. Reaching out for assistance with the process could be a great first step.