Filing for bankruptcy is a daunting decision. It brings with it a whirlwind of questions, and one of the biggest is: Can I keep my home? In this blog, we will break down what you need to know to navigate this complex issue.
Several factors will influence whether you can keep your home after filing for bankruptcy. Here is what the bankruptcy court considers.
Consider the type of bankruptcy you file
The type of bankruptcy you file plays a crucial role in whether you can keep your home. Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, involves selling non-exempt assets to pay off debt. The exemptions in Chapter 7 are lower and stricter. If your home has significant non-exempt equity, you might have to sell it or buy it back from the trustee.
Chapter 13 bankruptcy is more lenient for homeowners. It enables you to develop a repayment plan to cover overdue mortgage payments. You are more likely to keep your home under Chapter 13, as it provides a structured way to manage your debts without immediate liquidation.
Consider the equity you have in your house
Equity plays a pivotal role. If you have minimal or negative equity, your home may be exempt from liquidation. However, if you have non-exempt equity, you might need to sell your home to pay off debts or buy it back from the trustee.
An attorney can help you decide which type of bankruptcy to declare. They can evaluate your financial situation and recommend the best course of action based on your specific circumstances.
Consider if you can afford your mortgage every month
Even if you keep your home during the bankruptcy process, your ability to maintain mortgage payments post-bankruptcy is crucial. If your financial situation improves after discharging other debts, you may find it easier to keep up with mortgage payments. Conversely, if you struggle to make payments, foreclosure remains a risk.
Filing for bankruptcy is a tough and emotional choice, especially when it involves your home. Knowing how bankruptcy laws work and how they affect you is important for making good decisions. The type of bankruptcy you choose, how much equity you have in your home, and your overall financial situation are key factors that will determine if you can keep your home.