Will I lose My Home If I File for Bankruptcy?
Filing bankruptcy does not mean you will automatically lose your home. In fact, the automatic stay provided when you file for bankruptcy could prevent your home from going into foreclosure.
The type of bankruptcy you file, the amount of equity you have in your home and even the state you live in will determine if you can keep this large asset.
Your Home and Chapter 7 Bankruptcy
During this common form of bankruptcy, the trustee working with you will sell off assets to pay your creditor. Any non-exempt assets will be sold, but the equity in your home or a large portion of it is likely exempt. As long as you keep up with your mortgage payments, you should be able to keep your home, provided you can afford the payments after your bankruptcy.
Is My Home Exempt?
Some of your personal property is exempted from Chapter 7 bankruptcy proceedings, including the equity in your home. If you have no equity, then you will have the option of keeping your home during the bankruptcy process. If you have equity, you’ll need to follow the guidelines laid out by your state to see if your home is exempt; your bankruptcy attorney can help you determine if your home is able to be saved during the process.
Homes and Chapter 13 Bankruptcy
If you are filing to reorganize your debt, you may be able to keep your home. You’ll need to continue to make your mortgage payments as you work through the process and make payments to your trustee. Once you leave bankruptcy, you’ll be able to keep your home, provided you continue to make timely payments.
What About Second Mortgages?
If you have a second mortgage, then it could be dismissed during bankruptcy; that second mortgage lender is considered an unsecured debt during the process. Your primary lender has priority and will be paid first. In some cases, a second mortgage could be removed entirely; your bankruptcy lawyer can help you determine what the most likely scenario is for your second mortgage.
Should you Let It Go?
Bankruptcy can give you a fresh start, and if you are too far underwater with your home, unable to make payments or owe far more than the home is worth, it could be time to walk away. You may be better off surrendering the home as part of the bankruptcy process and getting a fresh start; a look at your post-bankruptcy budget and the cost of comparable rentals in your area can help you decide if you want to keep the home at all.
Get a Fresh Start – A Bankruptcy Lawyer Can Help
If the bills, collectors and liens are getting to be too much, or you are simply too far under water to catch up, bankruptcy can help. You’ll get immediate stress relief – those collectors won’t be able to call and harass you any longer. You’ll also be able to work out a plan for a fresh financial start; if you’re considering bankruptcy, contact us right away to learn about your options and to get peace of mind about this often-misunderstood process.
