How likely is it that I'll lose my home in bankruptcy?

Whether or not you can keep a home after you file bankruptcy depends on numerous factors. The type of bankruptcy you file, your own financial situation and the amount of equity you have in the home all play a role in the outcome. Many, many people who file either Chapter 7 or Chapter 13 bankruptcy are able to keep their homes, but you do need to consult with a bankruptcy attorney to find out how your specific situation is likely to play out.

First, the type of bankruptcy you file makes a difference. Chapter 7 exemptions are strict, which means if you have enough equity in the home, you might be required to sell it and use the proceeds to may some payment to creditors before you can receive a discharge of debts. In a Chapter 13 bankruptcy, you may be able to work with your attorney to create a payment plan that includes your mortgage during the bankruptcy tenure; you resume normal payments after all other debts were discharged through the bankruptcy.

Equity is another deciding factor. In most cases, there's no point in selling a home that doesn't have equity, as it won't typically result in any ability to make payments to creditors. Even if you have a little equity in your home, you might not be forced to sell it to file for Chapter 7 bankruptcy. Talk to a bankruptcy lawyer to find out specific exemptions and whether you are below them and qualify to keep your home.

If you still owe a mortgage on the home, though, you do have to show that you are able to cover that cost, especially in a Chapter 13 repayment plan. If you can't afford regular expenses such as food and utilities, your mortgage and an appropriate payment toward your Chapter 13 plan, then the court is less likely to approve your plan.

Source: FindLaw, "Can I Keep My Home After Filing Bankruptcy?," accessed April 07, 2017

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