In general, if you file for bankruptcy and you want to keep your home, you must continue making your regular mortgage payments. Read on to learn more about what happens if you don’t pay your mortgage in bankruptcy.
A bankruptcy discharge is designed to wipe out your personal liability for most types of debt. However, it doesn’t automatically eliminate liens from your property. In most cases, a mortgage lender’s lien (and right to foreclose on your house) survives bankruptcy. This means that if you want to keep your home, you must pay your mortgage during and after bankruptcy. But if you have a wholly unsecured second mortgage (or other junior lien), you may be able to get rid of it in Chapter 13 bankruptcy (discussed below).
If your first mortgage balance exceeds the value of your home, you can eliminate your second mortgage in Chapter 13 bankruptcy through a process called lien stripping. If you are stripping a junior mortgage lien from your home, you don’t have to make payments on it during bankruptcy. But you still have to continue paying your first mortgage.
To learn more, see Removing a Second Mortgage in Bankruptcy.
When you file for bankruptcy relief, the automatic stay prohibits your mortgage lender from foreclosing on your home. But if you don’t pay your mortgage, your lender has grounds to ask the court to lift the stay so that it can initiate or continue the foreclosure process. To do this, the lender will have to file a motion for relief from the stay with the court. However, unless you can show that you can resume your payments and begin catching up on your arrears, most courts will grant the lender’s request.