How can I keep my home if I file bankruptcy?

I current on all my bill including my mortgage. However do to medical problems I’m unable to maintain a full time job, which is creating additional hardship. Since I’m current on my bills can I file bankruptcy? What chapter bankruptcy I’m I able to keep my home?

Asked on December 6, 2011 under Bankruptcy Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If you have significant equity in your home, chapter 13 is better, since ch. 13 involves setting up a multi-year payment plan based on your income vs. expenses and obligations; it does not involve liquidating assets. Ch. 7, on the other hand, is liquidation bankruptcy, so any significant net positive assets will be potentially considered as available to repay creditors.

However, the above said, under either chapter, you can only ultimately keep your home if you can pay your mortgage (or some mutually agreeable portion of your mortgage which you can negotiate with the lender). That is because while a bankruptcy temporarily "stays," or halts, collections efforts, it does not extinguish a security interest; since the mortgage is a security interest in your home (home as collaterol for loan), if you can't pay the loan, the bank will eventually be able to foreclose and take your home. The bankruptcy will prevent the bank from also pursuing a "deficiency judgment" if the home is underwater (i.e. you won't be sued for any unpaid balance on the loan, remaining after foreclosure), but it will *not* prevent foreclosure indefinitely unless you can continue to pay the mortgage, or that portion of the mortgage which the bank agrees to.


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