A reverse mortgage can be an appealing option if money is tight and you have a significant amount of equity in your home. However, if you think you might be headed towards bankruptcy, getting a reverse mortgage might not be a good idea.
Having a reverse mortgage and filing for bankruptcy could create a confusing situation. You could risk losing your home or completely losing your reverse mortgage money.
If you are struggling with your mortgage payments and are considering a reverse mortgage or have a reverse mortgage and are headed toward bankruptcy, it might be a good idea to consult an attorney.
Joshua Denbeaux is an experienced New Jersey mortgage and bankruptcy attorney. Contact Denbeaux Law today to learn more about your options and how we may be able to help you.
What Is A Reverse Mortgage?
A reverse mortgage is when you sell the equity that you have in your home to your reverse mortgage lender. There are a lot of requirements you have to meet in order to qualify for a reverse mortgage, including that you usually have to be over the age of 60.
Once you have a reverse mortgage, you’ll get paid from your lender in a lump sum payment or monthly installments. When you pass away or move out of your home for good the mortgage company will take possession of your home.
Reverse Mortgages During Bankruptcy
Filing for bankruptcy while having a reverse mortgage could create a difficult situation. Depending on the terms of your reverse mortgage, it could be unclear what will happen to your mortgage if you file for bankruptcy. In most cases, we don’t recommend filing for bankruptcy, but if you don’t have any other options, it could be a solution for you.
Under a Chapter 7 bankruptcy, your assets that you have debt or loans on are repossessed. If you have a reverse mortgage and file a Chapter 7 bankruptcy, your house will most likely be repossessed by your lender, although you may be able to apply for a homestead exemption. Every situation is different, however, and this may not always be the case.
If you file a Chapter 13 bankruptcy, you will typically have payment plans set up to help you pay off your debts and keep your home. With a reverse mortgage, you don’t owe money to your lender, but it could disrupt your reverse mortgage payments.
In some reverse mortgages, filing for bankruptcy could violate the terms of your reverse mortgage, which would mean that you would lose your home. Your reverse mortgage lender could stop your access to your funds or line of credit from your reverse mortgage. If you were paid in a lump sum, your reverse mortgage lender could potentially be entitled to some or all of the funds you’ve received.
Contact A Mortgage Attorney
Struggling with your financial situation while having a reverse mortgage could be a difficult and stressful situation. There are a lot of unknowns when it comes to how reverse mortgages work during bankruptcy.
An attorney can help you with reverse mortgage solutions and bankruptcy to help you avoid bankruptcy and any potential negative repercussions. Talking through your options with an attorney can help make sure you choose the path that’s best for you.
Contact Joshua Denbeaux today to learn more about how we may be able to help you with a difficult financial situation and a reverse mortgage.
