What Will Happen to My House in a Chapter 7 Bankruptcy Case?

If you are planning to file for Chapter 7 bankruptcy and you currently have a mortgage on a home, you likely have concerns about what will happen to your house. You might be considering bankruptcy in part because you have gotten behind on your mortgage payments and you are now facing foreclosure. Even if you are not facing foreclosure, you might be struggling to make mortgage payments and could be behind schedule by a couple of months. Combined with other consumer debt, you might be thinking that a liquidation bankruptcy is the best option to discharge your debts and to get a fresh start. What will happen to your home?

Many people assume that anyone who owns a home and files for Chapter 7 bankruptcy will lose their home, and this is not automatically true. Indeed, the answer to that question depends on a handful of different questions and issues, and we want to give you an idea of where to get started.

Is Your Home Going Into Foreclosure?

One of the first questions you will want to consider is whether you are behind on mortgage payments and, as a result, whether your home is going into foreclosure. If you are nearing the stages at which the bank might begin the process of foreclosing on your home, or if the foreclosure process has already begun, it will likely be difficult to keep your home if you file for Chapter 7 bankruptcy. When you first file for Chapter 7 bankruptcy, you will have the benefit of the automatic stay, which will prevent debt collectors (including your mortgage servicer) from taking additional debt collection actions against you. However, once it is clear that you are filing for a liquidation bankruptcy, if you are behind on your mortgage payments, your mortgage lender will likely ask the court to move forward with the sale of your home.

If you want to keep your home and you are behind on your mortgage payments, you should talk with a bankruptcy lawyer about whether you are eligible to file for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, the automatic stay can stop a foreclosure process from going forward, and then the debtor can get back on track with mortgage payments through the debt reorganization plan.

Are You Able to Exempt All of the Equity in Your Home?

If you do want to file for Chapter 7 bankruptcy and you are not behind on your mortgage payments, you will want to ask yourself whether you can exempt all of the equity in your home. Under the Illinois homestead exemption, you can exempt up to $15,000 of equity in your home, or up to $30,000 for spouses jointly filing a bankruptcy petition. If you are able to exempt the equity, it may be possible to keep your home in your Chapter 7 bankruptcy case.

Contact an Oak Park Bankruptcy Attorney for Assistance

Making the decision to file for personal bankruptcy can be a complicated one, and it is critical to have an experienced Oak Park consumer bankruptcy lawyer on your side to assist you. Determining how to handle your home in a bankruptcy case may be extremely complex, and you will want to have an advocate on your side with experience handling cases like yours. Contact the Emerson Law Firm to learn more about how we can assist you.


See Related Blog Posts:
Frequently Asked Questions About Bankruptcy Exemptions
Can I Purchase or Sell Real Property During a Chapter 13 Bankruptcy Case?

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