If we made a list of common inquiries we were asked by clients about Chapter 7 Bankruptcy, the question at the top of the list would be, “Can I keep my house if I file for Chapter 7 Bankruptcy?” If you have experience dealing with attorneys, you will not be surprised to hear that the answer is maybe.
There are two main types of debt incurred by a typical consumer, secured and unsecured. An unsecured debt is one that is not guaranteed by an underlying asset such as a car or home. The most typical form of unsecured debt is credit card debt. A secured debt, as you might have guessed, is a debt guaranteed by and underlying asset. A mortgage or security deed is a secured debt guaranteed by real property. For most people the only mortgage they have is on their home.
If you fall behind on a secured debt the lender has the ability to take back possession of the underlying property and sell it to satisfy the debt. For your home, this is typically done through foreclosure.
But what about your home? Will you lose it if you file Chapter 7 Bankruptcy? The answer is yes and no. If you are current on your payments to the lender, then you will almost certainly be able to sign what is called a reaffirmation agreement with the lender which will allow you to keep the house. If you are behind on your mortgage, then it is likely that the lender will be able to foreclose on the property and sell it despite the bankruptcy.
That is a long answer to a short question that does not even attempt to delve into the numerous other complexities involved in how your home will be affected by a bankruptcy. Larsen & Teusink, PC has experience in real property law, bankruptcy and foreclosure. To get a more in depth answer to your questions, please feel free to visit our website or call us at 678.553.2923.
Posted under Bankruptcy, Foreclosure, Real Estate Law
This post was written by Eric Teusink on June 17, 2010
