Upside Down on Home? There are Options

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While the economy is slowly getting back on its feet, it’s not uncommon for people to still be upside down on their home mortgages. Being “upside down” means owing more than your house is worth. It’s important to know that there are options for you if you find yourself in this position. A bankruptcy attorney like a phoenix chapter 7 bankruptcy lawyer can advise you on your particular situation.

Options for Upside Down Home

When figuring out ways to handle debt and your upside down home, a bankruptcy attorney will look at a few things, including:

  1. your income and expenses for the past 6 months,
  2.  your projected income and expenses,
  3.  the value of all of your assets.

Once all this information is provided, an attorney will determine if you are qualified to file for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7

Chapter 7 (also known an straight bankruptcy) is the most common form of bankruptcy and is available to consumers and businesses.

Under Chapter 7, assets are sold off so that the proceeds can go to paying debt. All proceeds from the sales of those assets are handed over to a trustee, who then pays down any and all creditors. After all creditors have been paid off they are no longer able to collect funds directly from you and your debts are cancelled, meaning you are no longer responsible for them.

You are not able to discharge the following debts under Chapter 7:

  • Alimony and child support
  • Drunk driving judgments, criminal fines, restitution
  • Debts incurred as the result of fraud or intentional wrongdoing
  • Back taxes under 3 years old
  • Student loans
  • Recent purchases made for substantial amounts
  • Contracts involving titles or liens such as land or automobiles

Most Chapter 7 bankruptcy debtors are able to keep their homes as long as they remain current on their mortgage payments. Some debtors lose their home if they have significant equity that can be used by the trustee to pay back unsecured creditors.

Chapter 13

Chapter 13 reorganizes debt so that you are able to pay back debts over the next three to five years. This pay-back plan is called a debt repayment schedule. Based on your income, and how much you owe, you’ll repay 10-100% of the debt you owe.

You are not able to discharge the following debts under Chapter 13:

  • Alimony and child support
  • Drunk driving judgments
  • Criminal fines
  • Student loans

Most debtors do not lose their home in Chapter 13 bankruptcy due to the fact that Chapter 13 creates a repayment plan to pay back-owed mortgage payments, thus allowing debtors to “get current” on their mortgage.

Bankruptcy can be an effective tool for helping those that are upside down on their mortgages get to a place where they are no longer upside down. A bankruptcy attorney will be able to look at your situation and determine if you need to file bankruptcy or simply refinance.

Working with a Bankruptcy Attorney

Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 7 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.

AZBK Lawyers 668 N. 44th St., Ste 320, Phoenix, AZ 85008 (602) 648-3274

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