Can I Keep My Home if I File Bankruptcy?
The answer is that you probably can, but there are two big factors to consider.
Equity is basically how much your house is worth after the mortgage is subtracted. For
example, if your house is worth $100,000 and there is a mortgage of $85,000, then you
have $15,000 of equity. In Alabama we have exemption laws that protect $15,500 of
equity in a home. (It is $31,000 of equity for a married couple).
If you have $15,500 or less of equity in your home, then you could file a Chapter 7 and
still be able to keep the home. If you have more than $15,500 of equity in your home,
you would not want to file a Chapter 7, but you could still file a Chapter 13 and be able to
keep the home.
Current on Payments?
If you are current on your payments, then you can file a Chapter 7 or a Chapter 13 and
keep your home as long as you continue to make the payments.
If you are behind on your payments, you will need to get current on them within a couple
of months of filing a Chapter 7 bankruptcy.
If you are behind on your payments, you can file a Chapter 13 bankruptcy and repay the
amount that you are behind through your case. A Chapter 13 case usually lasts between 3
and 5 years. You would not have to get caught up on the payments because they are
included in the amount that you are paying to the court each month. But you do have to
resume making regular mortgage payments directly to the mortgage company each month starting with the month after you file.
A Chapter 13 can stop a foreclosure as long as it is filed BEFORE the foreclosure takes
place. If you are facing a foreclosure, do not wait to contact an attorney about possibly
filing a Chapter 13.