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Can I keep my House?

Clients frequently ask me the following questions or make the following statement….

1. “Can I keep my house if I file for a chapter 7 bankruptcy?”

The short answer is likely yes.  In general, if your home has equity that can be exempted and you continue to make your required payments then you can keep your home.

If there is no equity in your home (your home is “underwater”) then the bankruptcy trustee won’t attempt to sell your home.  Likewise, if there is no equity above your exemption in your home, then the trustee won’t attempt to sell your home.

One role of the chapter 7 bankruptcy trustee is to liquidate assets that are non-exempt.  Therefore, if your home is exempt then the trustee cannot liquidate it and you can keep it.  If there is non-exempt equity in your home, and you want to keep it, then you likely will not consider filing a chapter 7 bankruptcy but may consider a Chapter 13.  This distinction is critical and something you should discuss with me.

If you are keeping your home, it is critical that you continue to make your required mortgage payments.  The bankruptcy discharges / eliminates your personal liability on the debt, but it does not alter or satisfy the lien.  As a result, after your discharge, your lender still has a lien on your home and should you not make your payments they can exercise any and all state rights it has in your home.  Therefore, KEEP MAKING YOUR REQUIRED PAYMENTS.

2.”Can I keep my home if I am behind on my payments?”

The answer more than likely is yes.  Under this situation you may want to file a Chapter 13 where you are allowed to pay the arrears back through your bankruptcy over time–years.  If you find yourself in this situation, I encourage you to contact me so we can discuss your options.

3. “I don’t want to put my house in the bankruptcy.”

Your home is an asset.   Therefore, you must “put it” in your bankruptcy.  One of the fundamental requirements of filing for bankruptcy is to list ALL your assets.  Your home is an asset.  But, as outlined above, just because you file for bankruptcy does not mean you’re going to lose your home.

 4.  ‘What if I do not want to keep my home?”

You are not required to keep your home if you file.  You may elect to “surrender” it.  Many of my clients select this option for a variety of reasons.  Each individual’s circumstances are unique .  It is helpful to seek legal advice as to which option makes the most sense for you.