Can I Keep My House If I File Bankruptcy?

This is one of the first questions I hear from people exploring whether or not to file bankruptcy. It is obviously a very important question. The short and simple answer is that you can keep your house if you continue to make the mortgage payments. In reality, this plays out in two ways:

  • You continue to make payments and the mortgage company continues to accept them; or
  • The mortgage company asks you to sign what is known as a reaffirmation agreement.

There are risks and sacrifices associated with each of these options. Be sure to consult with a bankruptcy attorney to understand how the debt on your house will be treated in a bankruptcy, depending on whether you want to keep the house or allow it to revert to the bank. There are also special considerations if you choose to file a chapter 13 bankruptcy instead of a chapter 7. Make sure you fully discuss with an attorney the different chapters of bankruptcy and the impact each will have on your home.If the burden of paying your mortgage payment is too high, then you can use bankruptcy in two ways to help you during this difficult time:

  • By filing bankruptcy, any difference between the value of your home and the amount you owe will be wiped out in a chapter 7 bankruptcy discharge or otherwise satisfied in a chapter 13 repayment plan; and
  • By filing bankruptcy, the foreclosure proceedings will be put on hold until the mortgage company obtains permission from the court to continue with foreclosure.

Every situation is unique, and should be discussed with an attorney.

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