Mortgage and Bankruptcy In Connecticut

 

You can maintain your house, even if you file bankruptcy.

 
Whether or not your home mortgage and home equity line of credit (HELOC) will be affected by your bankruptcy filing depends on whether or not you are current in your monthly installment payments, whether you file Chapter 7 or Chapter 13, and what you would like to accomplish.

Secured debt has two components:

  • Your personal obligation to repay a loan to the bank (the note)
  • A conveyance of property to the bank to collateralize your obligation (the mortgage)

Your bankruptcy will result in the discharge of your personal obligations under the mortgage note, so if you believe you will not be able to maintain the current payments on your mortgage, or if there is little or no equity in the property, you may decide to simply surrender your house to foreclosure, and walk away from the property. Upon entry of your bankruptcy discharge, you will have no further obligation on the mortgage note, and the bank will not be able to sue you, even if the house is underwater or worth less than the amount you owe to the bank on the mortgage loan.

Fortunately, for many filers, there is another option: continue to pay the mortgage according to its terms, and thereby retain your home (pay and retain). The law does not require Connecticut filers to “reaffirm” their personal liability on the mortgage note in order to keep their homes. It is enough to simply maintain current payments. Many homeowners who file bankruptcy choose this option, which enables them to keep their home. Of course, in order to do so, you have to maintain current payments or, if the mortgage is already in default, bring it current and keep it current.

However, if, in the future, you are unable to maintain current payments, you can abandon the property at that time, knowing that your personal obligation on the mortgage note has been discharged.

In Chapter 13, there are some additional options. If your mortgage is in default, you can cure the arrearages by paying them over three to five years, usually at 0 percent interest, through the Chapter 13 plan, and thereby keep your home. If you have a second mortgage, or HELOC, which is completely underwater (no equity value whatsoever), you can avoid and obtain the release of the mortgage, and discharge your personal obligation on the note, if you pay the bank in the same manner as other unsecured creditors through your Chapter 13 plan.

Contact Lawyer Edward P. Jurkiewicz Today

If you would like to learn more about our firm, please contact our office. We offer a free initial consultation to discuss your situation. With offices in Hartford, Avon and Torrington, we represent clients throughout Connecticut, including the Greater Hartford metropolitan area, and the Farmington Valley and Litchfield County areas.

Hartford area bankruptcy attorney and divorce lawyer Edward P. Jurkiewicz has over 20 years of experience representing clients. Our firm represents debtors and creditors and handles both relatively simple divorces and bankruptcies and more complex litigation matters. With this depth of experience, our firm is able to anticipate and prepare for any potential issues that could arise in your bankruptcy, divorce or family matter.

CONTACT US TODAY AT 860-299-6263

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