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Real Estate Words of the Day: Acceleration Clause & Bankruptcy

What is an Acceleration Clause?

An acceleration clause is a contract provision. It allows the lender to require payment of the outstanding loan balance for various reasons, like if certain requirements are not met.

The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

This can happen in a number of ways, including:

  • Missing a mortgage payment

  • Filing for bankruptcy

  • Transferring property in an unauthorized way

  • Canceling homeowners insurance

  • Neglecting to keep your home in a livable condition



By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities.

Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts.

A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

And remember, you cannot simply shout “I DECLARE BANKRUPTCY” like Michael from the office. You have to go through the formal process.


We hope this helps you to understand Acceleration Clauses and Bankruptcy a bit more.

Knowing the language of the real estate world can help you to understand this process, and communicate with your real estate agent more efficiently!

Please feel free to reach out and contact us if you have any questions about these terms, or anything real estate!

Happy reading! - The Morris Team


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