If I File for Bankruptcy, Can I Keep My House?

When you are considering consumer bankruptcy, our experienced Oak Park bankruptcy attorneys know that you probably have a wide variety of questions about the bankruptcy process. Indeed, we often work with clients in the early stages of bankruptcy planning who want to know more about bankruptcy exemptions, types of assets they will be able to retain if they file for bankruptcy, and how different types of personal bankruptcy affect both debts and assets. One question we frequently receive from debtors concerns the bankruptcy process in relation to staying in your home or your condo.

So, if you file for bankruptcy, can you keep your house? The answer to that question will depend upon several different factors, and we want to provide you with some of the key information you will need to answer that question for yourself. Ultimately, you should seek advice from a bankruptcy attorney who can assess the particular facts of your case to determine whether or not you are likely to be able to stay in your home following bankruptcy, but the following information can help to get you started.

Which Type of Bankruptcy are You Filing for?

One of the first questions you will want to ask yourself is whether you are planning to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you are planning to file for Chapter 13 bankruptcy, losing your house is not something you need to worry about as a result of your bankruptcy filing. Since Chapter 13 bankruptcy is a type of reorganization bankruptcy, assets are not liquidated so that creditors can be repaid. Instead, the debtor repays creditors over a period of three to five years through a payment plan, and at the end of that plan, remaining debt can be eligible for discharge.

In fact, many debtors choose to file for Chapter 13 bankruptcy when they are at risk of foreclosure because Chapter 13 bankruptcy can actually allow a debtor to keep a house that is near foreclosure. How does this work? The automatic stay stops the foreclosure proceedings from moving forward, and the debtor can use the repayment plan to get back on track with mortgage payments.

If you are filing for Chapter 7 bankruptcy, which is a type of liquidation bankruptcy, you could be at risk of losing your house, but you will need to take some other factors into consideration.

How Much Equity is in Your Home?

Illinois bankruptcy exemptions, and the homestead exemption in particular, may allow you to stay in your house even if you are filing for Chapter 7 bankruptcy. Under Illinois law, an individual person filing for bankruptcy can exempt up to $15,000 equity in the home. A married couple filing for bankruptcy together can double that exemption to $30,000.

What does this mean for keeping your house? If the bankruptcy exemption covers the amount of equity in your home, you can reaffirm the remaining amount of debt and continue making mortgage payments even if other debts are discharged (and the equity in your home will not be subject to liquidation). However, if you are filing for Chapter 7 bankruptcy and your home is going into foreclosure, you may not be able to stay in the property.

Contact Our Bankruptcy Lawyers in Oak Park

If you have any questions about the homestead exemption or keeping your house in bankruptcy, an Oak Park bankruptcy attorney at our firm can assist you. Contact the Emerson Law Firm today for more information.



See Related Blog Posts:

Actions to Avoid Before You File for Bankruptcy

Is Bankruptcy a Solution for Me?

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