Can I File for Chapter 7 Bankruptcy Protection and Still Save My Home?

The prospect of losing a house is often one of the most challenging issues debtors in financial stress must face. Not simply a place to live, a house can also represent a significant emotional and financial investment. An attorney with bankruptcy experience may help you find a way to keep your home, but it is best to file for bankruptcy protection before the lender begins foreclosure proceedings.
If you have zero equity in your home, or if you are eligible to exempt all of the equity in your home, the bankruptcy trustee will not take your house. If you are unable to exempt a sizable portion of the equity in your home, your attorney most likely will suggest to file a chapter 13 bankruptcy which will allow you to repay the equity to your creditors and keep all of your property. Bear in mind that homestead and wildcard exemptions vary from state to state. In Missouri the homestead exemption is $15,000 and the wildcard exemption is $600. An experienced attorney can help you navigate these exemptions to your best advantage. Alternatively, if you wish not to keep your house for example if the mortgage is so much under water that is does not make financial sense to keep paying on the mortgage, you can surrender the house and you would not be liable for the mortgage payments.

If you choose to retain your home, you must continue making your mortgage payments to avoid that your mortgage company commences foreclosure proceedings. Filing bankruptcy causes an automatic stay to go into effect. This prevents your creditors from trying to collect from you including repossessions and foreclosures. A lender holding a secured claim, such as a mortgage or lien on a car title, can file for a relief from stay. Once the court lifts the stay, your lender can proceed with foreclosure if you are behind on your mortgage payments.

If you are behind on your mortgage, you and your lawyer may be able to negotiate payment terms. If your lender refuses to negotiate, a Chapter 13 bankruptcy may be your only option to save your home. Through a Chapter 13 payment plan, you might be able to pay off the arrearage.

If you are current on your mortgage payments, you may choose to reaffirm and keep your house. Use this time to try and negotiate the terms of your mortgage through your lawyer. Keep in mind that reaffirmation means you will be held legally responsible for this particular debt, even after the rest of your debts are discharged. If you are unable to keep up with the payments, your lender can still foreclose and hold you responsible for any deficiency left after a foreclosure sale. If the schedules I and J, which list your income and your expenses on your bankruptcy petition, indicate that you will be unable to afford mortgage payments even after discharge, a bankruptcy court judge is unlikely to approve a reaffirmation agreement. However, if your reaffirmation agreement is handled by your attorney, the approval of the court is not necessary for the reaffirmation. In addition, many debtors will find that eliminating the majority of their unsecured debt will allow them to continue their payments on a house and car.

Watch our video: Is it too late to stop the foreclosure?


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