Reverse Mortgages and Bankruptcy
If you want to keep your home and have a reverse mortgage it is likely you'll be able to seek bankruptcy protection. A reverse mortgage allows you to get cash from your home after converting part of the equity. This type of mortgage may allow a homeowner to stop making payments on their mortgage without the need to sell the home. There are specific qualifications needed for this type of mortgage as well as resolving certain issues before filing your bankruptcy petition.
Types of Reverse Mortgages
There are different types of reverse mortgages and most often, you need to be 62 years of age or older with a significant amount of equity in the home with a loan-to-value of at least 50 percent. Such mortgages allow the homeowner to live at home without making mortgage payments, make the decision to sell the property, or the property is no longer considered the primary residence.
Reverse mortgages may allow a homeowner to take money out against the home as an equity line of credit, one time lump sum, fixed monthly distribution or the option to not make mortgage payments while having no access to the equity.
Can I File Bankruptcy with a Reverse Mortgage?
If You Want to File Bankruptcy
If you want to file bankruptcy you'll want to consider the home value, current balance and monthly payments. You may be able to protect a considerable amount of equity in the home based on its value. You may need to get an appraisal to get accurate home value details. While you may not be making payments on the property there may be an outstanding balance. You can obtain this information from the lender which is needed if you intend to sell the home.
The reverse mortgage documentation may have information about monthly payments that have stopped or details related to the equity line of credit. You may need to reaffirm your agreement with your lender if you continue to receive payments when the bankruptcy is completed. Review your situation with a qualified bankruptcy attorney.
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