Bankruptcy and Your Home: Can You Keep Your House After Filing?

For many individuals facing financial difficulties, the fear of losing their home is one of the biggest concerns when considering bankruptcy.

The prospect of foreclosure and displacement can be daunting, but the truth is that bankruptcy may actually provide a way to keep your house.

In this article, we’ll explore the relationship between bankruptcy and home ownership, helping you understand your options and the potential impact on your primary residence.

The Automatic Stay: A Powerful Protection

One of the most significant benefits of filing for bankruptcy is the automatic stay, which immediately goes into effect upon filing your bankruptcy petition.

The automatic stay is a powerful legal tool that prohibits creditors from taking any further collection actions against you, including foreclosure proceedings on your home.

This automatic stay provides a much-needed breathing room, allowing you to reorganize your finances and explore your options for keeping your house.

It’s important to note that the automatic stay is only temporary, and creditors may eventually seek relief from the stay or dismissal of your bankruptcy case if you fail to take the necessary steps to address your mortgage debt.

Chapter 7 Bankruptcy and Your Home

In a Chapter 7 bankruptcy, commonly known as a “liquidation” bankruptcy, the primary goal is to discharge eligible unsecured debts, such as credit card balances, medical bills, and personal loans. When it comes to your home, there are a few potential scenarios:

  1. You Have Equity in Your Home: If you have equity in your home (the value of your home exceeds the amount you owe on your mortgage), you may be able to keep it by exempting some or all of that equity using state or federal exemptions. However, if your equity exceeds the exemption limits, the bankruptcy trustee may have the option to sell your home and distribute the non-exempt equity to your creditors.
  2. You Are Current on Your Mortgage Payments: If you are current on your mortgage payments and have no equity in your home, you may be able to keep your house and continue making regular payments after your bankruptcy discharge.
  3. You Are Behind on Your Mortgage Payments: If you have fallen behind on your mortgage payments and have little or no equity in your home, you may face the risk of foreclosure. In this case, you may need to explore alternative options, such as negotiating a loan modification or potentially filing for Chapter 13 bankruptcy.

Chapter 13 Bankruptcy: The Reorganization Option

Chapter 13 bankruptcy, also known as a “reorganization” bankruptcy, offers a different approach to dealing with secured debts like your mortgage. In a Chapter 13 bankruptcy, you propose a repayment plan to catch up on past-due mortgage payments and maintain regular mortgage payments going forward.

Here’s how it works:

  1. The Repayment Plan: Under the guidance of a bankruptcy attorney, you’ll develop a repayment plan that outlines how you’ll catch up on your past-due mortgage payments over a period of three to five years. This plan must be approved by the bankruptcy court and meet certain requirements, such as demonstrating your ability to make the proposed payments.
  2. Addressing Mortgage Arrears: The repayment plan will include provisions for repaying the outstanding mortgage arrears (missed payments, late fees, etc.) over the duration of the plan. This allows you to gradually catch up on your past-due payments while continuing to make your regular monthly mortgage payments.
  3. Modifying Mortgage Terms: In some cases, Chapter 13 bankruptcy may also allow you to modify the terms of your mortgage, such as reducing the interest rate or extending the repayment period. However, this option is generally only available for certain types of mortgages and may require meeting specific criteria.


keeping your home with bankruptcy


The Importance of Staying Current on Payments

Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, it’s crucial to stay current on your mortgage payments throughout the bankruptcy process.

Failing to make your regular mortgage payments can jeopardize your ability to keep your home, as creditors may seek relief from the automatic stay or seek dismissal of your bankruptcy case.

If you’re facing temporary financial hardship and cannot make your mortgage payments, it’s important to communicate with your lender or bankruptcy attorney promptly. They may be able to provide guidance on alternative options, such as seeking a temporary loan modification or exploring government assistance programs.

Exemptions and Your Home’s Equity

In both Chapter 7 and Chapter 13 bankruptcies, the concept of exemptions plays a crucial role in determining whether you can keep your home.

Exemptions are legal provisions that allow you to protect a certain amount of equity in your home from being seized by the bankruptcy trustee.

Each state has its own set of exemption laws, and the federal bankruptcy code also provides a set of exemptions that you may be able to use. When filing for bankruptcy, you’ll need to carefully review the applicable exemption laws and work with your bankruptcy attorney to determine the best strategy for protecting your home’s equity.

Rebuilding Your Financial Future

While keeping your home is often a top priority during bankruptcy, it’s important to recognize that the process is designed to provide a fresh start and an opportunity to rebuild your financial future.

By discharging or reorganizing your debts, you can free up resources to focus on regaining financial stability and making responsible financial decisions going forward.

After completing your bankruptcy, it’s essential to develop a comprehensive plan for rebuilding your credit, managing your finances effectively, and avoiding the accumulation of new debt.

This may involve working with a financial advisor, participating in credit counseling programs, or implementing strict budgeting and savings strategies.


keep your home filing bankruptcy


Seeking Professional Guidance

The relationship between bankruptcy and home ownership can be complex, with various factors influencing the outcome. It’s crucial to seek the guidance of an experienced bankruptcy attorney who can evaluate your specific situation and provide personalized advice on the best course of action.

A skilled bankruptcy attorney can help you navigate the legal process, explore all available options for keeping your home, and ensure that you comply with all requirements throughout the bankruptcy proceedings.

They can also provide valuable insights into the long-term implications of your decisions and help you develop a strategy for rebuilding your financial future after bankruptcy.

Summing It Up

The prospect of losing your home can be one of the most daunting aspects of facing financial difficulties, but bankruptcy may actually provide a path to keeping your house.

By understanding the automatic stay, the differences between Chapter 7 and Chapter 13 bankruptcies, the role of exemptions, and the importance of staying current on mortgage payments, you can make informed decisions about the best course of action for your unique circumstances.

Remember, seeking professional guidance from an experienced bankruptcy attorney is crucial to navigating the complexities of the bankruptcy process and maximizing your chances of keeping your home.

With the right legal support and a commitment to responsible financial management, bankruptcy can offer a fresh start and the opportunity to rebuild your financial future on a solid foundation.


Learn More

At Blue Bee Bankruptcy, our lawyers are highly experienced in bankruptcy options. More importantly, we understand that each case we receive is unique and each client has different needs and goals. We will discuss these signs with you and decide the best route to take.

We strive to help our clients rebuild their lives and take steps toward a better financial future through filing. 


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If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.

Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!

Contact Us Today For Help! You can schedule your free consultation online or call us at (801) 285-0980.


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