Can I Keep My House if I File for Bankruptcy?

Can I Keep My House if I File for Bankruptcy?

June 29, 2020

Deciding to file for bankruptcy is a big decision, and one that involves potentially giving up a lot of your assets. Keeping your property, including your home, during bankruptcy in The Woodlands, TX, depends on which type of bankruptcy you file for and several other important factors.

It’s important to consult with a bankruptcy attorney when you have a house or other important assets at stake—they can guide you through the process and help retain the assets you care about most.

Here’s how to determine whether you’ll be able to keep your house.

Which type of bankruptcy are you filing?

The goal behind bankruptcy cases is twofold: to repay your creditors as much as possible, while also giving you a fresh start. Depending on the type of bankruptcy you file, you may have to sell your home to repay your creditors.

If you file for Chapter 7 bankruptcy and want to keep your home, it’s possible—as long as you’re still current on your mortgage payments (or recently became current thanks to a lender modification), and your state allows you to exempt the equity you already have in your home. Chapter 7 bankruptcy is designed to get rid of as much debt as possible in a short amount of time, and comes with stricter rules and fewer flexible options.

Chapter 13 bankruptcy allows you to make a plan for catching up to your mortgage payments, but it doesn’t necessarily mean that you’ll succeed in keeping your home. Chapter 13 gives you three to five years to pay off your debts with a payment plan—but you’ll still need to pay your current mortgage bills on top of that. If you can make it work, you can keep your home, but many people still end up having to sell.

How much equity do you have in your home?

In Chapter 7 bankruptcy, the court will look at how much equity you have in your home—that is, the market value of your home with the mortgage balance subtracted. Most Chapter 7 filers have negative equity in their home, which allows them to exempt the home and keep it. However, if you have equity over the limit, you may have to sell the home.

Can you afford your mortgage payments?

Finally, you’ll need to make enough money to be able to afford your mortgage payments if you keep your home—which sounds obvious, but depending on the type of bankruptcy you file, you may have additional payments to make. In some cases, being free of their other debts allows filers to easily pay their mortgages, whereas others struggle. Unfortunately, if you can’t make your payments, the bank will be forced to foreclose on your home. You may find that selling your home offers you the opportunity to walk away with fewer debts, which can be a great relief.

If you need to talk to a bankruptcy attorney about keeping your home in The Woodlands, TX, call James R. Jones, Attorney at Law today.

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