Skip to Content

Bankruptcy and Discharged Mortgage Debt

August 9, 2020 Bankruptcy

If I file a chapter 7 and my mortgage was discharged, do I still have to make mortgage payments?

Nearly 1.4 million Floridians have lost their jobs since the pandemic, COVID 19 began in March, 2020.  The unemployment rate in Florida has reached a devastating 14.5% and more than 90,000 people applied for first-time unemployment claims in June, 2020.  There is no doubt that with this economic devastation, many individuals will file for Chapter 7 bankruptcy.  While many major companies such as Hertz and Neiman Marcus filed for Chapter 11 bankruptcy, we have not yet seen a similar increase in personal bankruptcy rates.  Experts speculate that this delay in the filing of personal bankruptcy is due in part to state shutdowns and temporary court closures.  That said, most experts agree that our country will see a flood of personal bankruptcy filings in the fall.

Many individuals face questions and lack knowledge about the process of filing Chapter 7 bankruptcy.  At its most basic level, Chapter 7 bankruptcy discharges (i.e., eliminates) certain debts at the cost of liquidating assets.  The assets eligible for liquidation include mortgage loans, vacation homes, boats, second vehicles, or collectibles.  In return, some debts that can be discharged are credit card debts and medical bills.  Although mortgage loans can be discharged, it is highly recommended for homeowners to continue making mortgage payments after filing for Chapter 7 bankruptcy.  By making mortgage payments, homeowners are able to retain their property.  Although filing for Chapter 7 bankruptcy discharges homeowners’ personal liability for their mortgage, it does not eliminate mortgage liens.  A mortgage lien is the legal right that a lender possesses to repossess property and to foreclose if mortgage payments are not made.  If a homeowner fails to make timely payments and wants to retain their residence, they will have to compensate for late payments and default fees in order to remain in good standing.  In addition, if homeowners do not make mortgage payments during and after bankruptcy discharge, lenders can foreclose their property.

If you are a homeowner and are considering filing for bankruptcy under Chapter 7, you should retain a knowledgeable bankruptcy attorney to make sure you understand your rights and responsibilities. For a free consultation with an experienced and skilled bankruptcy attorney, contact The Law Office of Carla Jones at (786) 378-8246.