Tuesday, June 19, 2012

How to Claim Bankruptcy on a VA Mortgage

By DB Jenkins

Bankruptcy protection is available under several Chapters under U.S. law. The most common types of bankruptcies are Chapter 7 and Chapter 13. Under Chapter 7 bankruptcy, most or all of your debts are canceled. Under Chapter 13 bankruptcy, you are ordered to complete a repayment plan designed by the court. If you have a VA (Veterans Affairs) mortgage, you can still file for either Chapter 7 or Chapter 13 bankruptcy.

Determine whether you qualify for bankruptcy. If you are filing for Chapter 13, you must not have more than $336,900 in unsecured debts or more than $1,010,650 in secured assets (real estate). If you are filing for Chapter 7 bankruptcy, you must not have filed for any bankruptcy protection in the last six months. Also, you must be currently enrolled in a credit counseling program.

Determine the reason for your bankruptcy. In most cases, this is insufficient income. Your debt-to-income ratio (DIR) must be well above the minimum amount required by the courts (55 percent) before you file. Calculate your DIR by dividing all monthly bills (including your VA mortgage payment) by your monthly gross income.

Draft a personal statement. You will submit this with all other copies of income documents and court forms. This letter must explicitly state the reason for bankruptcy as well as all other efforts to repay your debts.

Hire a bankruptcy lawyer. While it's not required, a bankruptcy lawyer can help you complete the extensive and sometimes complicated bankruptcy forms. In some cases, a bankruptcy attorney can help you save both your home and your VA mortgage--especially of you choose to file Chapter 13.

File all documents and bankruptcy forms (see Resources for a complete list of forms) to the bankruptcy court. Once received, the court will schedule a hearing for all creditors to plead their case, and the court will determine the plan for either repayment or cancellation of debts.

Be prepared to lose your VA loan and home if you file for Chapter 7. This type of bankruptcy liquidates all of your available assets--including your house--to repay as much of the debt as possible.


http://www.lenderva.com

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