How does a bankruptcy filing affect theequity ina home?

I own a home that is unoccupied. The first mortgage is $158,000 and the 2nd is $48,000. I cannot sell it after a year of trying. The only other thing in my name is my car and my mom’s house and car. If Iclaim back my car, and my mother’s house and car in backruptcy will it affect the equity in her home?

Asked on March 11, 2011 under Bankruptcy Law, Georgia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Bankruptcy does not directly affect equity; equity is a function of a home's market value less any loans outstanding on the home. The important thing to remember is this: for a secured debt--like a mortgage--if you don't keep paying the debt, the lender can take the property (foreclose), even in bankruptyc; bankruptcy does not deprive a lender of its security interst in the property, though it can't then also sue you for any unpaid balance. While there are some differences between a ch. 13 and a ch. 7 filing, in any event, you'll have to keep paying on the home or else lose it. With two mortgages, both will have to be paid. If you're willing to walk away from the home, you may be able to do that safely in bankruptcy.

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