If I file bankruptcy, will I lose my house?
The first question anyone contemplating bankruptcy asks is either "Is bankruptcy right for me?" or "Will I lose my house?" We answered the former above and now we'll delve into the latter. Actually, the house question is probably asked more commonly.
And, we have good news.Many folks are able to keep their house and bankruptcy. The best test is whether you can make up any back payments and make current and future payments as well.
- If you can make the mortgage payments, you likely can keep your house.Remember that you need to be able to make your real estate tax and homeowners' insurance payments as well.
- There is more good news: Second and third mortgages that are no longer secured by the value of the property (i.e. the house is worth less than the mortgages) can be discharged and make keeping your house easier.
Chapter 7: If you file a Chapter 7 bankruptcy, your home state may offer exemptions that protect the equity in your house up to a certain amount. Some states protect just a few thousand dollars of equity and other states protect 100% of home equity - other states are somewhere in between and some states provide a choice between home state and federal exemptions.
- See our How to Find a Bankruptcy Attorney article that references your state to determine how much equity you can protect.
Most people who file Chapter 7 bankruptcy actually do keep their house. In fact, most Chapter 7 filers don't lose any assets including their house, car, jewelry, and personal possessions.
If you have more equity in your house than your exemption protects, don't count all as lost. Your bankruptcy attorney may be able to protect your home equity with another exemption or tenancy by the entireties laws.
Never give up your house without getting good advice.
Chapter 13: If you file a Chapter 13 bankruptcy, there is absolutely no limit to the home equity that can be protected. Some bankruptcy filers protect multi-million dollar homes.
In Chapter 13 bankruptcies, so long as you can make all house payments, you can keep your house.