Bankruptcy: Can I Save My Home?

The answer to this question will vary depending on whether you have equity in your home or if you’re current on your mortgage.

The Equity Principal

Equity is all about what you owe on the mortgage relative to what the house is worth. If there is no equity and you are not behind on the mortgage, your house should be safe in bankruptcy, as long as you can keep current on the payments.

If you do have equity in the home you may have more of a problem because the trustee whether he can sell the home so that he can pay the net proceeds to pay unsecured creditors. The trustee will make an analysis whether the amount that you owe on the house plus the exemptions you’re allowed to keep are less than the value of the house. If they are less, then the trustee may list your house for sale and you may lose your home. In that case, you don’t want to go into a Chapter 7 bankruptcy, you’ll want to consider a different approach to your financial problems.

Falling Behind on Your Mortgage

If you’re behind on your mortgage you can use a Chapter 13 case to catch up on the arrears that you owe the lender. You can typically do that over a 60 month period. That’s one of the big advantages in a Chapter 13 case and sometimes why it’s better than a loan modification where you are uncertain about what the lender is going to do for a year or more.