If you own a home rather than renting your home then a Chapter 7 bankruptcy comes with some repercussions. That is, if you have a mortgage and you intend to see your mortgage debt discharged, then you will have to turn your home over the trustee, allowing it to be sold.
There are ways to keep your home, even in a Chapter 7. Here’s what you need to know.
How to Keep Your House Under Chapter 7
Four things must be true for you to keep your house.
First, the amount of equity in your home must not exceed your exemptions.
Second, you must be caught up on your mortgage payments. If you’re behind and you can’t catch up there will be no way for you to do this on a Chapter 7 plan.
Third, you must convince the trustee that you will be able to keep making your mortgage payments. That is, you must be able to affirm you can repay the debt without incurring further personal financial harm.
Fourth, if the trustee agrees, you can “reaffirm” the mortgage debt. You go back to making your regular house payments as the bankruptcy proceeds, and continue making them after the bankruptcy has been discharged. This is usually the best option if discharging the rest of your debt will give you the breathing room you need to meet your monthly living expenses.
Moving if You Cannot Keep Your House
Most Chapter 7 filers will surrender their property by filing an intent to surrender with their bankruptcy petitions. This will require the mortgage lender to begin the foreclosure proceedings. The foreclosure itself will be wiped from your credit record after your debt discharge, as will any deficiency balance.
Foreclosure means that you’ll receive a date that will require you to vacate the home, which does mean you will not have to leave the home right away. Yet in general, once you file your intent to surrender the home it will be prudent to begin looking for new lodgings and packing up your things.
Get Help Today
Decisions like choosing Chapter 7 or Chapter 13 shouldn’t be made in a vacuum, and neither should decisions about whether you keep your home. They should be made while considering all of the complex factors that go into managing your bankruptcy.
Get a free one hour consultation from Simon Haysom, Attorneys at Law. Bring us your total financial picture and we’ll advise you on your best path forward.
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