What You Need In Order To Keep Your Home When Filing For Chapter 7 Bankruptcy

16 November 2021
 Categories: , Blog

If you are considering filing for Chapter 7 bankruptcy as a means of dealing with an overwhelming amount of debt, you may find yourself wondering whether or not you will be able to keep your home if you choose to utilize this debt relief option. Unfortunately, there is no one size fits all answer to this question. This is because there are a variety of factors that go into determining whether or not you will be forced to sell your home as part of your bankruptcy settlement. While consulting with a bankruptcy or real estate attorney regarding your specific case is often the best way to make this determination, you can get a general idea of what to expect by taking the time to review the information below.

The Current Status Of Your Mortgage Payments

When you file for Chapter 7 bankruptcy your mortgage lender will be temporarily forbidden from pursuing foreclosure proceedings against you due to the legal status of your estate. However, since secured debts such as a mortgage are not able to be discharged as part of a Chapter 7 bankruptcy, the right to foreclose on your property will be restored once your case is settled. Consequently, simply filing for bankruptcy relief will not allow you to keep your home if you are not up to date on your mortgage payments. 

Your Ability To Pay Moving Forward

In addition to considering the current status of your mortgage payments, your bankruptcy trustee will also take into account your ability to continue making your monthly mortgage payments once your case has been settled. If your monthly payments exceed what is allowed by your current budget, you may be required to sell the property in order to protect any equity that you have acquired. 

The Amount Of Equity You Have Accumulated

Chapter 7 bankruptcy exemption laws do allow you to protect only a limited amount of equity in your home. Consequently, whether or not you are allowed to keep your home will often depend greatly on the amount of equity that you have already acquired prior to filing for bankruptcy. If you have little or no equity in your home, are both up-to-date on your mortgage payments, and are able to maintain a good payment record moving forward, you will likely be allowed to keep your home.

However, if you have a significant amount of equity in your home, you may be required to sell your home and use a portion of that equity in order to pay off some of your debt. Since the amount of equity that is protected by exemption laws will vary from state to state, it is important that you consult with a legal professional regarding your case in order to determine whether or not the equity in your home falls within the legal limits for your particular state. 

Contact a bankruptcy attorney near you to learn more.