Can my home be saved if I file for chapter 7 bankruptcy?

We have fallen a bit behind on our mortgage payments, mostly because we've been struggling with credit card and other bills. If we file for chapter 7, will our home be spared? What happens if the bank begins the foreclosure process before we file, is it too late at that point?

Answers

You shouldn't be worried about losing your home in a chapter 7 bankruptcy. The state homestead exemptions are more than adequate to cover the equity most people have in their homes. However, you will need to get caught up with your mortgage payments and continue paying monthly to keep your home, bankruptcy won't relieve you of that obligation.

What Happens if You File Before Foreclosure

If you file your bankruptcy petition and required schedules before the foreclosure suit is started, then your lender will mosty likely be barred from bringing any suit, and it should buy you some time to save up some cash. Additionally, during the bankruptcy process, your attorney will be negotiating with your lender to get you a modified loan, as well as allow you to "cure" your past due mortgage payments.

What Happens if You File After Foreclosure Has Begun

Now it get's more complicated. You will likely need to have your bankruptcy attorney file an emergency bankruptcy petition to ensure the stay is put into effect early enough. Additionally, your lender will probably attempt to convince the court to lift the automatic stay and continue with the foreclosure.

Your lawyer will counter this motion, and if successful, you will be protected from the foreclosure.

After the Bankruptcy is Done

Once your case has been discharged, it should be much easier to meet your monthly mortgage requirements, because your unsecured debts, such as credit cards and personal loans will have been wiped out, leaving only secured debts such as your mortgage and car payment.

Talk to a bankruptcy lawyer to discuss your situation, and find out if bankruptcy would work for you. Alternatively, a bankruptcy attorney may be able to help negotiate with your lender to get a loan modified.

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