Suppose you are struggling with significant debt due to a serious illness, job loss, a divorce or another unexpected life situation. In that case, filing bankruptcy may present a beneficial way to find financial relief. However, you might worry about losing your house when you decide to file.
The average American, according to CNBC, has approximately $90,460 in debt, and many people with this kind of debt also worry about losing their homes in bankruptcy. Filing bankruptcy does not necessarily mean you will need to give up your home, but certain factors can affect what happens with it.
Chapter 7 bankruptcy
There are both state and federal laws that exempt particular property from liquidation. Often, these exemptions cover homes.
If you face foreclosure, filing for Chapter 7 bankruptcy triggers an automatic stay that can delay the foreclosure process. If you are behind on your mortgage payments when you file, you may not be able to keep your house.
Beyond where you stand with your payments, whether you can keep your home depends on whether you can keep making your payments after you file bankruptcy and how much equity you have in your home.
Chapter 13 bankruptcy
If you file for Chapter 13 bankruptcy, you may have a better chance of keeping your home. This form of bankruptcy allows you to catch up on some of your debts during a three- or five-year repayment plan.
Every situation is different, so your circumstances will affect whether you can keep your home after filing for bankruptcy. Carefully consider whether filing Chapter 7 or Chapter 13 bankruptcy is the correct choice for your situation, depending on what will happen with your home.