Can I keep my house in bankruptcy?

It is possible to keep your home after filing for bankruptcy, however this is not always the case for everyone.  One huge factor that plays a role in if you can keep your home is what type of bankruptcy you file for.  There are two main different kinds of bankruptcies.  The first is chapter seven which is when the person filing for bankruptcy's non-exempt assets are sold by the trustee and the profits are given to creditors to which the debtor is in debt to.  The second type of bankruptcy is chapter thirteen which is when the person in debt is able to keep his/her property but must pay off all their debts within a three to five year period.  Therefore, if your property is worth less then a certain dollar amount you are able to keep it. Chapter seven is a lot stricter than chapter thirteen, so if you file for chapter thirteen bankruptcy you are much more likely to be able to keep your home.
For those who file chapter seven there are ways to still be able to keep your home. When deciding whether your house is able to be kept it is important to look at the equity of the home.  What this is is how much your house is worth after all the debt is taken off.  Most people that file for bankruptcy do not have a lot of equity in their homes and therefore it is not worth it for the house to be sold.  If there is a lot of equity in the home however, it is quite possible that you may have to sell your home to use the money to pay back your debts.
One last factor in whether you can keep your home is if you can pay your mortgage.  If you are unable to make these payments you might be forced to foreclose your home and not be able to stay there.  So therefore, yes it is possible to keep your home but there are a lot of factors that go into deciding if you can and if you should keep it.

It is possible to keep one’s home when filing for bankruptcy but it depends on the details of the situation. Specifically, on what state you live in, how much home equity you have, what chapter of bankruptcy you are filing for and if you are current on your mortgage.

If you are filing for chapter 7 bankruptcy, to discharge your debts – the answer depends in part on if you are up to date on your mortgage payments. If you are up to date on your payments, your home you live in can be exempt from being used to pay your debts under the homestead exemption.

However, this exemption has a big limitation. Homes are only exempt up to a certain equity level (the current home market value minus any outstanding mortgage balance) which varies from state to state. Depending on how much equity you have in your home past the exemption level, the bankruptcy trustee may decide to sell your home to pay back your creditors. The federal exemption is up to $32,000 for a couple filing jointly, the exemption is up to $5000 in Georgia, while Florida exempts the entire home’s equity as long as the home does not exceed half an acre in a municipality or 160 acres.  An example is below:

Tom bought a ¼ acre, $100,000 home. He has $80,000 left on his mortgage, which means he has $20,000 worth of equity in his home. He filed for bankruptcy; here are the results state by state.

1. State following federal law: His home is exempt since it has less than $32,000 of equity
2. Georgia: Tom’s home is sold to pay back debts since it has more than $5000 of equity.
3. Florida: Tom’s home would be exempt since it is smaller than half an acre.

If you are behind on your mortgage payments, chapter 7 bankruptcy will delay but not resolve your problem. When you file for bankruptcy, an automatic stay is put against your mortgage lender, prohibiting them from initiating or continuing a foreclosure proceeding. However, this stay only lasts at maximum as long as the bankruptcy proceedings. Since your mortgage will not be discharged through chapter 7 bankruptcy, your lender will be able to foreclose on you after the bankruptcy process concludes. Furthermore, the courts can, and often does, grant the mortgage lender the ability to continue or begin foreclosure proceedings on your home during the bankruptcy proceedings (this process generally takes 10-20 days).

If you are filing chapter 13 bankruptcy, which creates a court ordered repayment plan for debt, you can push off foreclosure and give yourself more time to pay back your mortgage. The stay granted by chapter 13 bankruptcy lasts for as long as you are in your court agreed payment plan. Chapter 13 payment plans generally last for three to five years.