What Happens to Your Mortgages in Bankruptcy in Ohio?

When facing bankruptcy in Ohio, many individuals wonder how their mortgage will be affected. Understanding this process is essential for homeowners navigating this difficult financial terrain. Below are key points to consider regarding what happens to your mortgages in bankruptcy.

Chapter 7 Bankruptcy: In Chapter 7 bankruptcy, also known as liquidation bankruptcy, your non-exempt assets may be sold to pay off creditors. However, most Ohio residents keep their homes through a homestead exemption, which allows a certain equity amount to remain protected. If you are current on your mortgage payments, your lender typically cannot foreclose during the bankruptcy process. You can continue to live in the home, but it's crucial to remain committed to making mortgage payments.

Chapter 13 Bankruptcy: Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows you to reorganize your debts into a repayment plan, usually lasting three to five years. This option is often preferable for homeowners looking to keep their homes while catching up on missed payments. In this scenario, you can propose a plan to make up for missed mortgage payments over time while continuing to make ongoing payments.

Automatic Stay: An automatic stay is issued as soon as you file for bankruptcy. This stay halts all collection efforts, including foreclosure proceedings. However, it’s important to know that the automatic stay is a temporary measure. You must navigate the bankruptcy process effectively to maintain your home in the long term.

Reaffirmation Agreements: If you want to keep your home in a Chapter 7 bankruptcy, you may need to enter a reaffirmation agreement with your lender. This legally binds you to continue paying the mortgage after your bankruptcy is discharged. It’s a crucial decision to make, as failing to uphold this agreement could result in foreclosure.

Foreclosure Risks: If you fall behind on your mortgage payments prior to filing for bankruptcy, you may face foreclosure even with the automatic stay in place. While the stay prevents immediate action from the lender, it does not eliminate the possibility of foreclosure if the bankruptcy is dismissed or if you fail to comply with the repayment plan in Chapter 13.

Consulting a Bankruptcy Attorney: Navigating bankruptcy and its impacts on your mortgage can be complex. Consulting with a qualified bankruptcy attorney in Ohio is highly recommended. They can provide tailored advice based on your specific situation, help you understand your rights, and guide you through the process of filing for bankruptcy.

In summary, the fate of your mortgage during bankruptcy in Ohio largely depends on the chapter you file for, your payment status, and the type of agreements you enter into with your lender. Being informed and seeking professional guidance can help you effectively manage your mortgage and work toward financial recovery.