If you file for bankruptcy can you keep your home?

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If you file for bankruptcy can you keep your home?

I tried working with a debt solution company and my credit card companies wouldn’t work with them. Now bankruptcy seems to be my only option. I am about 2 months behind on my 2nd mortgage. If I file bankruptcy will I lose my home? I can’t lose my home.

Asked on August 11, 2010 under Bankruptcy Law, Arizona

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

It depends on the type of bankruptcy that you file.  In a Chapter 7, you will lose assets but get rid of debts.  However, you can either "reaffirm" your mortgage loan (legally obligating yourself to repay the loan) or, possibly not have to reaffirm and just keep making the payments.  If your home equity is larger than the state's homestead exemption, Chapter 7 is not the choice since you would probably lose your home.  If you fall behind on payments, and have some equity in your home, Chapter 13 bankruptcy may be a better choice for you because it allows you to pay off the mortgage the missed payments over time and therefore face less risk to losing your home to the trustee.  However, a major factor in a Chapter 13 is whether a debtor, whose home loan is in default, can make the larger payments (there are late fees, etc). 


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