Watching your finances spin out of control may prove anxiety-inducing, and you may find yourself wondering whether bankruptcy may give you the fresh start you need. You may wonder, however, whether filing for bankruptcy may lead to the automatic loss of your home. A common misconception about the bankruptcy process is that losing your home is inevitable, but in truth, it is far from an absolute.
According to the San Francisco Chronicle, there are several factors that determine whether you get to keep your home after filing for personal bankruptcy. The type of bankruptcy filing you pursue is one of them.
Chapter 7 filings
When it comes to whether you get to keep your home when filing for Chapter 7, the answer is maybe. It depends on several factors, among them how much nonexempt equity you have in your home and whether you have been paying your mortgage. If you do not have much equity in your home, the chances of getting to keep it improve. If you have substantial equity, your bankruptcy trustee may have an obligation to sell it to pay your creditors.
Chapter 13 filings
A Chapter 13 bankruptcy involves restructuring your debts so that they become more manageable. The process includes working out a payment plan and sticking to it for three-to-five years. If you hold up your end of the agreement and stay current on your mortgage and other payments, you may be able to keep your house.
You may have emotional ties to your home, but in some instances, it may not benefit you to stay there. You have the option to surrender your home during bankruptcy. If market conditions are poor or you could rent another space somewhere else for less money, letting your home go may make financial sense.