Converting a Bankruptcy Case: What You Need to Know?
Struggling with mortgage debt is, unfortunately, far from uncommon. In fact, according to one study, mortgage debt makes up about 70% of all consumer debt here in the United States. In some cases, mortgage debt may grow so significant that it’s no longer possible to pay it off. If you find yourself in this situation, you’re likely overwhelmed, but you do have options. Continue reading and reach out to the seasoned South Dakota bankruptcy lawyers here at 605 Bankruptcy for assistance handling your mortgage debt.
Yes, bankruptcy can be a powerful tool for addressing mortgage debt, depending on your specific financial circumstances. Through bankruptcy, you may have the opportunity to eliminate or restructure your debt to create a more manageable financial situation.
If you’re behind on your mortgage payments, filing for bankruptcy may allow you to pause foreclosure proceedings temporarily through an automatic stay, giving you time to regroup and explore your options. Chapter 13 bankruptcy, for example, allows you to reorganize your debts into a structured repayment plan that spans three to five years. This can give you the opportunity to catch up on missed mortgage payments while keeping your home. Alternatively, Chapter 7 bankruptcy may enable you to discharge unsecured debts, freeing up resources to focus on your mortgage. However, Chapter 7 is not designed to help you catch up on mortgage arrears, so its applicability will depend on whether you plan to retain or surrender your home.
Our experienced South Dakota bankruptcy attorneys can assess your unique situation and determine the best strategy to address your mortgage debt effectively.
One of the most common questions we hear is whether filing for bankruptcy means losing your home. The answer depends on several factors, including the type of bankruptcy you file, the equity in your home, and your ability to keep up with ongoing mortgage payments.
Under Chapter 13 bankruptcy, you are more likely to keep your home because the process is designed to help you catch up on overdue payments over time. As long as you comply with the repayment plan approved by the court, you can avoid foreclosure and remain in your home.
In Chapter 7 bankruptcy, whether you can keep your home depends on the equity you have and the applicable homestead exemption in South Dakota. If your equity is within the exemption limit, your home may be protected from liquidation. However, you must also be able to stay current on mortgage payments moving forward, as Chapter 7 does not allow you to cure arrears like Chapter 13 does.
The type of bankruptcy you qualify for depends on your income, assets, and financial goals. To file for Chapter 7 bankruptcy, you must pass the means test, which evaluates your income against the median income in South Dakota. If your income falls below the threshold, you are likely eligible for Chapter 7. This form of bankruptcy is typically faster and involves liquidating non-exempt assets to pay creditors, though many South Dakota residents can protect their homes with the appropriate exemptions.
Chapter 13 bankruptcy, on the other hand, does not have an income cap but requires you to demonstrate sufficient income to meet the terms of a court-approved repayment plan. This option is ideal for individuals who want to retain their home while reorganizing their debts.
Both Chapter 7 and Chapter 13 have specific eligibility requirements and processes, and the best option for you depends on your personal circumstances. Our knowledgeable attorneys can walk you through the qualification process, ensuring you take the right steps toward achieving financial stability.
For professional help reorganizing or discharging significant debt, you can depend on the seasoned South Dakota mortgage debt lawyers here at 605 Bankruptcy. Contact our legal team to schedule your free initial consultation today. We’re here to discuss your circumstances, listen to your goals, and, from there, build a comprehensive plan to get you out of debt.
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