Can I file for bankruptcy and still keep my home?

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Can I file for bankruptcy and still keep my home?

Asked on February 5, 2014 under Bankruptcy Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

Maybe; the issue is, will you be able to work something out with the lender, possibly using the bankruptcy as leverage, that will let you keep it? Bankruptcy filings temporarily stay, or stop, foreclosure and other collections actions, but if a debt is secured by property, the way a mortgage or HELOC is secured by a home, the lender will, after few months (assuming it makes the proper application to the court) be allowed to foreclose and take the home if the debt is not paid. If it does so, though, it *only* gets the home--it cannot also, due to the bankruptcy, sue you for any additional or remaining balance due. Lenders do not necessarily want homes--they can be difficult to sell, and can take money just to maintain; rather then want to be paid. Since the bankruptcy would let you walk away from the home and your debt, leaving the lender with a home it does not necessarily want (expecially if there is little equity in it), the lender has an incentive to work something out with you--to perhaps take smaller monthly payments, or stretch payment out over a longer period of time, or forgive part of the debt. Therefore, while you will have to work something out with the lender, or else it can foreclose, the bankruptcy can give you leverage to come to a mutually acceptable agreement.


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