Detroit Bankruptcy Lawyers: Can I keep My House If I File For Bankruptcy?

     The general answer to this question is yes, it’s possible to keep your home if you file bankruptcy. However, there may be instances where you won’t be able to keep your home, and this will depend on if you file for Chapter 7 or Chapter 13 bankruptcy.      If you file for Chapter 7, your goal is to get out of debt. So the question is: can you afford to make the mortgage payments on your home? If not, then it is a good idea to surrender your home in bankruptcy and get out from the mortgage. Your mortgage company may require you to sign a reaffirmation agreement on your mortgage, which has the effect of keeping the mortgage out of bankruptcy. When you sign the agreement, you will be responsible for the debt until its paid off, and you do not have the protection of the bankruptcy discharge. If you do not sign the agreement, your liability on the mortgage will be discharged and you don’t have to worry about paying on it.      If you can afford the mortgage, are you behind in the payments? If so, you will not be able to keep the home and the mortgage company will foreclose and take your home. But you will not be liable on the mortgage, as the mortgage will be discharged in your Chapter 7 bankruptcy.      Next we have to look at the equity in your home. The Michigan and Federal bankruptcy exemptions allow you to “exempt” a certain dollar amount of equity in your home. If your equity falls below this a mount, you won’t have any issues with the Chapter 7 trustee. However, if you have more equity than allowed, the the Chapter 7 trustee will use their legal power to sell the house to pay off your creditors.      So what do you do if you are behind in your payments or have too much equity? Then we want to look at filing a Chapter 13. If you are behind in your payments, we can file a chapter 13, where you will “pay back” the past due amount, and the current amount, through your chapter 13 plan. As long as your make your chapter 13 payments, the mortgage company can’t foreclose on your home. Chapter 13 is a great way to get caught up on your house payments.      If you have too much equity in your home, you can protect your home with a Chapter 13 also. In a chapter 13, you pay back all or a portion of your debts. So you are allowed to keep your home, assuming you keep up on the secured payments on the home and your chapter 13 plan payments.      Another advantage of a chapter 13 is how you can eliminate your second mortgage. See this article for more information.      If you have questions about keeping your home while file for bankruptcy, give us a call at (586) 439-4297 for a free consultation. No two cases are alike and we will need to analyze your financial situation to see whether you should file for chapter 7 or chapter 13.  

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