Keeping Your Home Through a Bankruptcy

I am often asked the following question by clients filing bankruptcy; “If I file a chapter 7 bankruptcy can I keep my home?” The answer depends on the response to two questions; (1) is your mortgage current and (2) how much equity exists in your home. If your mortgage is current then you are not at risk of losing your home to the mortgage holder through a default and foreclosure process. If you have less than the allowed amount (i.e., your equity is less than the amount that can be exempted in a bankruptcy) of equity in a chapter 7 bankruptcy then you are not at risk of the bankruptcy court taking your home. So if the client responds with, “I am current on my mortgage and I do not have a lot of equity in my home” my response is “that is good news, you should not have any problem keeping it even though you are filing bankruptcy.” On the other hand, if the mortgage is behind then the client is informed that filing a chapter 7 bankruptcy will not prevent the mortgage holder from foreclosing on the home if it chooses to do so. Similarly, if the home has more equity than what can be exempted in a chapter 7, the client is informed of the associated risks of filing a chapter 7 bankruptcy. Regardless of the situation, the client is always advised to meet with our attorney for a more detailed consultation on the matter.