Can I Keep My Home in Chapter 7?

Chapter 7 bankruptcy is known as “liquidation” bankruptcy for a reason. Generally speaking, assets in a Chapter 7 bankruptcy are turned back over to creditors to offset the unpaid debts of the person filing. The rest of the debt, after the assets have been liquidated and applied to outstanding balances, is discharged by the judge. However, there are exceptions to this rule. This is particularly true when it comes to your home or other assets in which you have no equity.

What Does The Trustee Want?

It is important to remember that a bankruptcy trustee’s job is to secure as much money as possible to pay creditors. By definition, that means that an asset with no value is a waste of time for the trustee and he or she will likely not bother with it. Therefore, if you have no or negative equity in your home, the trustee is usually not interested in trying to take that asset and sell it to pay creditors. If you owe more on your home than it is worth, you may be in a position to negotiate to keep your home rather than turn it over to the creditors.

Will I Have To Pay For the House?

It is important to clarify: bankruptcy does not mean you get a free house! In fact, many people filing Chapter 7 choose to allow the bank to take the home so that they can discharge the debt through the bankruptcy. If you choose to keep your home and are allowed to do so under the terms of the bankruptcy, you will still have to pay the mortgage payments, any late fees, taxes, insurance and any other expenses related to the home. If you do so, you can reaffirm the debt with the bank or mortgage company and keep the home as long as you make your payments in a timely manner. If you do not make your payments, the bank can still foreclose on your house outside of the bankruptcy. The benefit of a Chapter 7 bankruptcy to most homeowners is that it delays the foreclosure procedure, allowing these homeowners time to regroup and find another place to live. However, for a few homeowners who want to keep their homes, it is possible to do so while filing a Chapter 7 bankruptcy in many cases. Contact the Oswalt Law Group for more information on how bankruptcy can help you protect your assets.