What Happens to My House if I File for Bankruptcy?

 

This is the very first question that comes to every individual's mind while filing for bankruptcy and why not! A house is where you get shelter and security. Finding an answer to this critical question is one of the foremost steps while filing for bankruptcy. Don't worry; we are here to help you through this detailed article. 

Whether you can keep your house or not depends solely on the individual's financial arrangements. But the good news is that there are various options through which you can keep your house while filing for bankruptcy. You get to keep your home in bankruptcy depending on certain factors such as the value of the property, the amount of mortgage outstanding, and the household income & expenses. 

The next thing that matters is whether you are filing for bankruptcy under Chapter 7 or Chapter 13. In Chapter 13, you will get to keep all of your properties, whereas, in Chapter 7, you may or may not lose property which isn't protected by an exemption. Most individuals who file for Chapter 7 bankruptcy are often surprised to know the rules and exceptions about keeping their property. The reason might be exempt, or perhaps it isn't worth enough to cover the cost of borrowings.

 

Let's have a look at an overview of how your property is treated in Chapter 7 and Chapter 13 bankruptcy?

 

Chapter 13 Bankruptcy

When you file for bankruptcy under Chapter 13, you will get to keep the property, no matter if it is exempt or not. But, you must come to an arrangement and propose a repayment structure to pay off some or all of your debts. Under this arrangement, you have to make monthly payments or installments for a certain period, usually three to five years. The more the debt, the more the length of the plan, so the installment period will depend on income, expenses, and debts. Once you repay it, all dischargeable debts are eliminated.

 

Chapter 7 Bankruptcy

With Chapter 7 bankruptcy, you may not need to repay any debt. However, you must forego your assets, including any property you own that isn't exempt under the state's law. The bankruptcy trustee may decide to sell the property and re-distribute the proceeds to your creditors. Once the property has been dealt with and you have come out with an arrangement, you receive the bankruptcy discharge. It usually takes somewhere around four to six months once you file the case. It includes your arrangement with the bankruptcy court, such as your dates for hearing and discussion.

 

Conclusion:

Though we are going to tell you how you can avoid foreclosure in a later blog, you should always discuss your alternatives with your bankruptcy attorney to save your home.