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Can I convert Chapter 13 to 7 and still save my home?

Continuing with this week's focus on Chapter 13 bankruptcy filings, let's consider a possible pitfall facing consumers.

You desperately want to save your home from foreclosure, so you file under Chapter 13. Your debt gets restructured, and you keep up with the first few mortgage payments. But all too soon you find yourself once again falling behind on your financial commitments.

Debtors may wonder if they could convert the bankruptcy from Chapter 13 to Chapter 7, yet still hold onto their home by making the mortgage payments each month.

Theoretically, it's possible, but it's very unlikely. Consider that if your lender was willing to negotiate with you, you might not have needed to file bankruptcy in the first place. What has changed to make the lender willing to do so now?

The best case scenario where this would work is to wait until you have brought your mortgage current, with no delinquencies. Then, with the lender's permission, you may be able to convert your bankruptcy to Chapter 7 for the rest of your debts.

As long as you can get your mortgage current (and not miss any payments) your lender has to accept your payments. However, even one late or missed payment, they can stop taking payments from you, causing you to lose your home.

In most cases, it's better to try to cut expenses and meet your obligations under Chapter 13. If that burden is simply too onerous to manage any longer but you still hope to save your home, you can seek the counsel of the attorney who filed your Chapter 13 bankruptcy.

He or she can then review your current status and advise you of your options.

Source: bankrate, "Failed Chapter 13 bankruptcy may cost home," Justin Harelik, accessed June 09, 2017

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  • NACA | National Association of Consumer Advocates
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