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Can I keep my house? I need to convert my chapter 13 to a chapter 7. Losing an income...

Cincinnati, OH |

We got caught up in a bad mortgage loan. High payments and balloon payment at the end equal to value of house. I'm 72 and my wife is 69 and just diagnosed with arthritic problem and can no longer work. We just have ss and my retirement. We also have a leased car. We cannot keep up the payments on the chap13 and eat. We also have a leased car where the lease is up in december. I have been making the house payments - bills in the chapter 13 including the car. Our attorney has been no help at all. I need to reduce stress also due to a triple bypass.

The house was arrears and that portion is in the Chap 13. I have been making the monthly payments on time ever since. We have been in the 13 for 2.5 years. The house is worth 120,000 - payments are 1200 for 30 years and the last payment is supposed to be 126,000 which will be when I'm 93 years old.

Attorney Answers 5


  1. I'm very sorry to hear about your situation.

    Your question is whether or not you can keep your house in a Chapter 7 case. The answer to that question depends on numerous facts you did not disclose, such as the value of your home, the amount of liens against it, the state whose exemptions laws apply in your case, when the balloon payment is due, and whether there are any arrears on the mortgages.

    Without that information, at a minimum, it is impossible to answer your question.

    If you don't stay current with payments due on the mortgage, then the mortgage lenders can seek to foreclose (or continue foreclosure) in a Chapter 7 case. If there's too much equity in the property, the Chapter 7 Trustee could sell it.

    You may have the ability to refinance or modify your loans outside of the bankruptcy, but as I mentioned, there's nowhere near enough information to advise you on that.

    You need to consult with an experienced bankruptcy attorney in your area to advise you on your options and risks related thereto.

    Mark Markus has been practicing exclusively bankruptcy law in California since 1991. He is a Certified Specialist in Bankruptcy Law by the State Bar of California Board of Legal Specialization, AV-Rated by martindale.com, and A+ rated by the Better Business Bureau. His webpage is www.bklaw.com

    Legal disclaimer: Mark J. Markus practices law in California only. The information is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Answering this question does not in any way constitute legal representation.


  2. Without knowing whether there are unpaid mortgage arrears or whether you have substantial unprotected equity in the property, it is pretty much impossible to answer your question. I will say that if you were using Chapter 13 as a mechanism for warding off foreclosure by catching up on your mortgage arrears over a three to five year period, converting to Chapter 7 may be counterproductive. If that is the case, and you convert to Chapter 7, you will need to either modify the mortgage or risk losing the property if you are unable to catch up.

    Please consult an attorney who is licensed in your state to evaluate your case if you have any questions at all. This communication does not in any way create an attorney client relationship.


  3. I agree with Attorney Markus' comments. Another avenue open to you is a possible loan modification. Most of the Common Pleas Courts have mediation programs where modifications can be work out if your home goes into foreclosure.

    Attorney Sternberg is admitted to the practice of law only in the State of Ohio. His answering of this question does not constitute an attorney client relationship, nor can his answer be relied on since the question does not permit Attorney Sternberg to seek additional information necessary to render an legal opinion.


  4. The problem you have is that you got behind on mortgage payments and have a sizable arrearage. The Chapter 13 Plan was designed to allow you to keep the house if you made current payments and made payments under the Plan towards the arrearage. A Chapter 7 conversion will not help you keep the house since you have an arrearage. I would suggest looking to modify the mortgage and perhaps seeing if something can be done with the leased vehicle.


  5. Unless your house arrears have already been paid by the trustee, you would be back in default when you left the 13. 7 has no provision for default.

    Furthermore, the balloon payment is a problem--unless you can refinance, how will you deal with this?

    If you are paying significant amounts to unsecured creditors, it is possible that your payment can be reduced.

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