Can I keep my house if I go bankrupt?


Quick Answer

Keeping a house after filing bankruptcy is possible. It depends on the type of bankruptcy and where it is filed because states have different rules. There is no answer that covers all cases, as explained by Nolo, FindLaw and Bankrate.com.

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Full Answer

Chapter 7 bankruptcy discharges most unsecured debt. It is possible to reaffirm secured debt, such as a mortgage, which enables the filer to keep the home by continuing to make payments. However, reaffirming is generally not the answer if the mortgage is already delinquent or if the filer's financial situation is unlikely to improve much after the bankruptcy. In the event that the filer cannot make payments, lenders are able to foreclose and sue for the difference between what selling the house brings and the balance owed on the reaffirmed loan.

If it's an option for the filer, a Chapter 13 bankruptcy is permitted to include a home in the debts to be paid under a court-supervised payment plan. Equity in the home is the prime consideration in both cases, with levels of exemption that differ from state to state. As long as the filer keeps current with mortgage payments, most lenders do not move to foreclose on a home even if its owner is bankrupt.

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