When people hear the word bankruptcy, they all too often immediately start to imagine losing everything they own and living in poverty. Bankruptcy, after all, means that you have reached a point where your debt overwhelms you and your income can no longer offset your financial obligations adequately.
However, even people who make six-figure salaries can find themselves in need of bankruptcy protections, and filing for bankruptcy doesn’t mean you can’t recover financially afterward or have a better future. It also doesn’t mean you can’t keep your most valuable assets. Bankruptcy has more to do with the amount of debt you have than the value of financial assets you possess.
It is true that in certain forms of bankruptcy, there could be requirements to liquidate some of your assets, potentially including equity in a home. However, Minnesota laws are quite liberal in their exemptions for bankruptcy. In other words, bankruptcy proceedings won’t cost you your house, but they could very well help you save your house. Bankruptcy helps you get debt back under control.
Unexpected life circumstances often contribute to financial issues. Did you wind up in a car accident with an uninsured driver that left you saddled with medical debt and unable to work? Were you diagnosed with cancer and suddenly had to worry about treatment and all of the expenses that go with it? Maybe you are the victim of crime but were unable to recover anything from the person who wronged you.
Regardless of how you wound up financially overextended or in debt, bankruptcy can help you take control of your unsecured debt and work toward a healthier financial future. Both Chapter 7 and Chapter 13 bankruptcy allow you to discharge your unsecured debt.
That means less money going out each month to unpaid medical bills and credit card balances. That extra money can make it a lot easier for you to stay on top of your mortgage payment every month. Filing can also help you stop collection activity, including early foreclosure proceedings.
Bankruptcy can offer you a chance to renegotiate with your lender.
Most mortgage companies and banks don’t want to foreclose on people who own their own homes. Banks are in the business of handling money, not managing properties. They may have to take a loss on reselling a foreclosed home, to say nothing of the headache that transpires between when you stop making payments and the assumed possession.
When you file for bankruptcy protection, you may have the option to renegotiate terms on your mortgage with your lender. That could include them forgiving recent payments that you missed and tacking those amounts on to the end of your mortgage instead of forcing you to pay a lump sum up front now.
There are other options available as well, which is why you will likely benefit from working with an attorney who understands bankruptcy proceedings in Minnesota while negotiating any sort of new terms for a mortgage during bankruptcy.