If you are behind on your house payments you will face some very important decisions about how to keep your house.  You cannot refuse to make payments on your home, file bankruptcy and then refuse to make any future payments on your home with expectation that you will be allowed to keep your home.  The law requires that you keep up your monthly mortgage payments on your home regardless of whether you file chapter 7 or chapter 13.  Under chapter 13, it may be possible for you to put your home mortgage arrearages into a chapter 13 plan and pay them out over a specified period of time, usually 60 months (5 years).  However, please understand that you will be required to make your future monthly house payments.

Under chapter 7, you must keep making the required house payments on your home mortgage, and make arrangements acceptable to the bank or mortgage company to catch up any delinquent payments.  Please do not file Chapter 7 bankruptcy with the expectation that the bank will be "willing to work with you" on catching up your back house payments.  If you file Chapter 7 bankruptcy, most lenders want all of the back house payments, delinquent interest, late charges and their attorney's fees and court costs all caught up before they will allow you to keep your home.

As we discussed in the exemption section, under Texas law you are allowed an unlimited homestead exemption of up to 10 acres in an urban area and 200 acres in a rural area.  In addition, the federal homestead exemption allows you to keep up to $17,425.00 in equity in any home.  If your home is paid for, then you will get to keep your home under the Texas exemptions or the federal exemptions, if applicable.

Under a chapter 13 bankruptcy proceeding, the mortgage company may allow you to keep your home if you agree to continue making monthly payments, pay the taxes and keep the property insured.  The delinquent payments will have to be placed into your chapter 13 plan and you will have to make your regular monthly house payments in addition to the chapter 13 plan payments.  It is not possible to modify a mortgage secured by a principal residence.  In some cases, it may be possible to modify wholly unsecured mortgages, such as second or third mortgages, if the value of the home is worth less than the value of the first mortgage.

It is possible to surrender your home to the creditors if you are unable to make the payments.  The mortgage company will then liquidate and sell your home.  Normally, you are not responsible for any remaining deficit if the property sells for an amount that is less than what you owe on the home.  However, the lender will be allowed an unsecured claim for the difference between the net proceeds from the sale and the amount of the debt.

The unsecured claim may be placed into your chapter 13 repayment plan to be paid as part of the unsecured pool.