One of the biggest fears of anyone who files for bankruptcy is that they are destined to lose their homes in the process. While in some cases, it is indeed possible to lose your home due to bankruptcy, that is far from a foregone conclusion.
Because carrying a heavy debt load can be incredibly stressful, let’s explore one of the biggest barriers people have to avoid filing for bankruptcy.
Losing your house in a bankruptcy
In certain circumstances, you could keep your house while filing under either Chapter 7 or Chapter 13. However, it is far more likely that you will be able to save your home by filing under Chapter 13.
What is your equity situation?
If you have only a little equity in your home or if your mortgage is underwater and you owe more than the house is worth, it might be possible (if unwise) to keep your family’s home and file under Chapter 7. The question you must ask yourself is whether keeping the house is worthwhile given your financial situation.
Keeping the house under Chapter 13
When you file this way, you pay a monthly sum to the bankruptcy trustee. These funds are then distributed among your creditors. If you have a sufficient income, you may be able to restructure your mortgage payments — even if overdue — and otherwise meet your financial obligations without losing the home.
This is not a decision you must make alone
Because everyone’s financial situation is different, there is no one-size-fits-all solution to your financial dilemmas. Fortunately, help is available. Learning more about your options can reduce your stress and allow you to choose the best route to fiscal freedom.