I’m considering Chapter 7 bankruptcy and wondering if I can include a reverse mortgage. I want to know if this type of debt can be part of a complete inclusion.
In Chapter 7, you can file with a reverse mortgage, but your home’s equity plays a big role. If you have exempt equity, you keep it. Nonexempt equity, however, might mean the trustee sells the property to pay creditors.
@Ezra
Got it. So, it depends on how much equity I can claim as exempt. Thanks!
A reverse mortgage can stay in place during a Chapter 7, but if your nonexempt equity is high, the trustee could require a sale. Exemptions vary by state, so make sure you check those limits.
Jules said:
A reverse mortgage can stay in place during a Chapter 7, but if your nonexempt equity is high, the trustee could require a sale. Exemptions vary by state, so make sure you check those limits.
I’ll look up the exemption details. Good advice, thanks!
Keep in mind that in Chapter 7, filing doesn’t remove the reverse mortgage itself; it just handles any personal liability tied to it. The loan is still attached to your property unless the house is sold.
@Storm
Makes sense—thank you for clarifying!
If you’re hoping to keep the property, consider Chapter 13, which allows you to reorganize debt while keeping your home. Just know that monthly payments might be impacted by any nonexempt equity.
Haim said:
If you’re hoping to keep the property, consider Chapter 13, which allows you to reorganize debt while keeping your home. Just know that monthly payments might be impacted by any nonexempt equity.
I might need to look into Chapter 13. Thanks for the insight!
Nonexempt equity is any value of your home that exceeds the federal exemption amount. In Chapter 7, this might lead to the sale of the home if the equity is substantial.
Remy said:
Nonexempt equity is any value of your home that exceeds the federal exemption amount. In Chapter 7, this might lead to the sale of the home if the equity is substantial.
Appreciate the breakdown on nonexempt equity!
With a reverse mortgage, it’s especially important to calculate both exempt and nonexempt equity carefully. Bankruptcy trustees take this seriously when evaluating assets in Chapter 7 cases.
Jessie said:
With a reverse mortgage, it’s especially important to calculate both exempt and nonexempt equity carefully. Bankruptcy trustees take this seriously when evaluating assets in Chapter 7 cases.
Thanks! I’ll make sure to get an accurate valuation.
Chapter 13 may give you more control over the property’s fate, especially if you’re keeping the reverse mortgage. You’d have three to five years to pay according to your plan.
Clove said:
Chapter 13 may give you more control over the property’s fate, especially if you’re keeping the reverse mortgage. You’d have three to five years to pay according to your plan.
Chapter 13 sounds like it has some benefits if I want to stay in the home.
Reverse mortgages don’t go away in bankruptcy—they’re secured by the property. If you stop payments, the lender still has rights to the home even if personal liability is discharged.
Paxton said:
Reverse mortgages don’t go away in bankruptcy—they’re secured by the property. If you stop payments, the lender still has rights to the home even if personal liability is discharged.
Important point. Thanks for reminding me about the lender’s rights.
Be careful with reverse mortgages in bankruptcy. Filing Chapter 7 doesn’t eliminate the reverse mortgage, just any liability if your equity qualifies as exempt.
Jace said:
Be careful with reverse mortgages in bankruptcy. Filing Chapter 7 doesn’t eliminate the reverse mortgage, just any liability if your equity qualifies as exempt.
That’s helpful info. Thank you!
Remember that federal exemptions may not fully cover your equity in a reverse mortgage situation. It’s wise to discuss this with a bankruptcy attorney.