Can I File for Bankruptcy If I Have a Reverse Mortgage?
Yes, you can file for bankruptcy if you have a reverse mortgage, but there are important considerations to keep in mind under U.S. guidelines.
When you file for bankruptcy in the United States, your assets, including your home, are reviewed to determine how much creditors can reclaim. The treatment of a reverse mortgage in bankruptcy depends on the type of bankruptcy you file and the specifics of your financial situation.
Chapter 7 Bankruptcy:
In a Chapter 7 bankruptcy, your non-exempt assets are liquidated to pay off your debts. The good news is that most states have homestead exemptions that protect a certain amount of equity in your home. Since a reverse mortgage typically uses up the home's equity, there might be little to no equity for the bankruptcy trustee to claim. Therefore, you might be able to keep your home. However, you must continue to meet the obligations of the reverse mortgage, such as maintaining the property and paying property taxes and insurance.
Chapter 13 Bankruptcy:
Chapter 13 bankruptcy involves creating a repayment plan to pay off your debts over three to five years. In this case, your home is less likely to be sold, and you can include the reverse mortgage payments in your repayment plan. This can help you catch up on any missed property tax or insurance payments required by your reverse mortgage agreement.
Protecting Your Home:
Regardless of the type of bankruptcy, staying current with the terms of your reverse mortgage is crucial. This means paying property taxes, homeowners insurance, and maintaining the property. Failure to meet these requirements can lead to foreclosure, regardless of your bankruptcy status.
Professional Advice:
Because bankruptcy laws are complex and vary by state, it is essential to seek professional advice. Consulting with a bankruptcy attorney who has experience with reverse mortgages will provide you with the best strategy for your situation.
For personalized assistance and to explore your options, consider contacting SouthRiverMortgage. They can help you understand how a reverse mortgage impacts your financial situation and guide you through the process to ensure you make the best decision for your circumstances.