Friday, April 2, 2010
Can I Keep The House If I File Bankruptcy
It might be the number one question I get asked about personal bankruptcy.
"Can I keep the house?"
It makes sense. We are often very attached to our homes. Few of us want to move if we don't have to.
It is probably also the area of bankruptcy law where there is the most confusion. I know this because when I give the answer, people are often surprised.
The answer: "It depends"
Really, there is no hard and fast rule here. It is not as if every chapter 7 debtor has to give up his or her house or every chapter 13 debtor gets to keep it. Or vice versa. It just doesn't work that way.
To oversimplify, a chapter 7 debtor who can manage to make all the mortgage payments probably will keep his or her house. There is at least one exception: If the house has substantial equity in it, the trustee might try to liquidate it. By substantial, I mean at least tens of thousands of dollars and maybe more. Frankly, that doesn't happen too often in the current environment.
For a chapter 13 debtor, the analysis is quite a bit more complex. Again to oversimplify, if the debtor can manage to pay the amounts owed to its lenders -- even by using future earnings over a period of years to pay amounts past due -- the debtor probably can keep the house. Whether this is possible in a particular circumstance depends upon a lot of different factors. That is one of the many reasons that it is best to have a competent bankruptcy lawyer if you are going to file a bankruptcy case.
So if you really want to know whether you get to keep the house if you file a bankruptcy, consult a bankruptcy attorney. He or she can look at your particular situation and see what your options are.