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We spoke to Realtors and debt consultants about if you will lose your house during bankruptcy.

There is no simple answer to this question, as it depends on a number of different factors. Generally speaking, filing for bankruptcy will not automatically result in the loss of your house. However, there are certain circumstances under which you may be at risk of losing your home if you file for bankruptcy protection. For example, if you have fallen behind on your mortgage payments and your home is in foreclosure, you may be at risk of losing your house if you file for bankruptcy.

Additionally, if you have significant equity in your home that exceeds the limits set by bankruptcy laws, it is possible that a portion or all of this equity could be seized by creditors as part of the bankruptcy process. Ultimately, whether or not you will lose your house in bankruptcy will depend on your specific financial situation and the terms of your mortgage agreement. However, it is important to consult with a bankruptcy attorney before deciding whether or not to file for protection, so that you can understand all of the risks and benefits associated with this decision.

-Shaun Martin, Denver Real Estate Solutions,

Lose your house if you file for bankruptcy

Do you lose your house if you file for bankruptcy? No, not necessarily. It is possible, but it depends on several factors, including if you are current on your mortgage and if you do not have a significant amount of equity. If you are unable to pay your mortgage and are already significantly behind on payments, then it is likely that the bank will foreclose, and you will be forced to move. But it is also possible that filing for bankruptcy could save your house from foreclosure.

Chapter 7 bankruptcy is used by people who have an overwhelming debt to try to discharge most or all their unsecured debts at once. This scenario does not provide a way to catch up on debt payments, including your mortgage, which gives your lienholder the right to repossess your home if you do not pay. However, discharging your other debts could potentially make it easier to make your mortgage payments meaning you can keep your home.

Chapter 13 bankruptcy is used by individuals with heavy debt but a reliable income. Chapter 13 allows individuals to create a repayment plan, providing the chance to catch up on mortgage payments and therefore keep the home.
Most people find the idea of bankruptcy intimidating and scary, but it can also be extremely beneficial. Hiring a bankruptcy lawyer helps a person choose whether chapter 7 or chapter 13 bankruptcy is right for their situation.

Lewis Landerholm, Pacific Cascade Legal,

Filing for bankruptcy

A small amount of equity

People file for bankruptcy for different reasons. The purpose of bankruptcy is the orderly resolution of a debtor’s debts. Sometimes a debtor will file bankruptcy to protect their home. When a home is being foreclosed, bankruptcy will automatically stay that action for a determination by the court if foreclosure should take place. A bankruptcy judge may determine that your home’s equity should be used to satisfy your debts and order a sale. Most debtors usually only have a small amount of equity, and that equity may be exempt from creditors.

A debtor’s unsecured debt may be discharged, making it easier for a debtor to pay their mortgage. While bankruptcy is a federal law, state laws may alter bankruptcy law. For example, Florida and Texas have unlimited homestead exemptions meaning all your equity in your personal home is protected from unsecured creditor claims. That is a long explanation for why you may not lose your home in bankruptcy.

If you have little or no equity and cannot make the agreed-upon payments, the bankruptcy judge may allow your lender to foreclose and sell your home on the courthouse steps in accordance with your loan documents.

When the sale brings more than the outstanding debt, past due interest, late fees, and other costs, the remainder is called a surplus, and you would be entitled to any surplus. If the sale does not cover the debt interest and expenses, there is a deficiency, and the lender may get a deficiency judgment against you. This would be unsecured debt and may be discharged in whole or part depending on the number of assets in your bankruptcy estate or dealt with in your chapter 13 plan.

Filing for bankruptcy

Bankruptcy can be complex. It would help if you employed an attorney to assist you when filing a bankruptcy. Many people respond to attorneys that are referred to as bankruptcy mills. These attorneys advertise heavily, promising debt relief, often promising $395, $595, or $995 to start a bankruptcy.

They say all your debt payments are reduced to only $100 to $200 per month in a Chapter 13 bankruptcy or fully extinguished in a Chapter 7 bankruptcy. This is a simple and often misleading representation of bankruptcy. A good bankruptcy attorney will cost $3,000-$6,000, depending on your market and the complexity of your situation. Most of this will be paid upfront, so save for this expense.

A simple bankruptcy probably can be handled for $1000-2000 in most situations, and one of these high-volume adverting attorneys that just file the paperwork and little else may be good enough. If you have a home or assets you want to protect, tax, student, or other secured debt, a more experienced bankruptcy attorney will result in a better outcome and is worth the extra expense.

Bruce Ailion,

beautiful view from house

Lose your house in bankruptcy

There are a number of factors to consider when determining whether or not you will lose your house in bankruptcy. First, you must determine if you own your home outright or if you have a mortgage. If you have a mortgage, your lender may require you to surrender your home in bankruptcy. However, if you own your home outright, you may be able to keep it.

Another factor to consider is the value of your home. If your home is worth more than the number of your debts, you may be able to keep it. However, if your home is worth less than the number of your debts, the trustee may elect to sell your home to pay off your creditors.

You should also consider whether you have any equity in your home. Equity is the portion of your home that you own outright, free and clear of any liens or mortgages. If you have equity in your home, the trustee may elect to sell your home and use the proceeds to pay off your creditors. However, you may be able to exempt (protect) some or all of your equity from the bankruptcy estate.

Finally, you should speak with an experienced bankruptcy attorney to determine whether or not you will lose your house in bankruptcy.

-Brandon Wilkes,