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Dealing with a home in Chapter 13 bankruptcy

Many families cherish their homes, which is why people often take steps to avoid foreclosure if they fall behind on mortgage payments. Texas residents in this situation might consider filing Chapter 13 bankruptcy in order to protect the home from being repossessed by a mortgage lender.

Under Chapter 13, a person has the opportunity to get caught up on house payments and other debts with the protection of a court. In addition to maintaining the terms of a repayment plan, individuals must also stay up to date on current mortgage payments.

Of course, everyone's financial situation is different -- and it can even change while they are in the midst of a bankruptcy repayment plan. For example, a person might have filed Chapter 13 to keep his or her home. In the process, the lender could have agreed to modify the terms of the mortgage to make monthly payments more affordable. If a person's finances remain tight -- or suffer additional strain -- during bankruptcy, then he or she might have to consider letting the house go.

Despite this plan, a person might have concerns about whether or not it's permissible to allow a lender to repossess a home during bankruptcy. This is a valid concern, because trustees are often concerned about the financial decisions a person makes while in bankruptcy. Choosing to let a house go is obviously not a trivial matter.

In short, Fox Business reports that it is possible to let a house go into foreclosure and remain in Chapter 13. Still, it might be best to make these considerations with the help of a trusted bankruptcy attorney. Dealing with debt can be a confusing experience, so it may be best to determine what options are available to find a way back to steadier financial grounds.

Source: Fox Business, "Can I Walk Away From Home in Bankruptcy?" Justin Harelik, Dec. 11, 2013

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