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Will I lose my home by filing Chapter 7?

On Behalf of | Jun 8, 2020 | Bankruptcy

Depending on your financial situation, filing a Chapter 7 bankruptcy may help you get back on your feet financially. However, many people worry about potentially losing their home or other vital assets through the process of a liquidation bankruptcy.

However, while it is possible for you to lose your home if you file a Chapter 7 bankruptcy, it is not a given. According to Findlaw, much depends on how much equity you have in your home at the time you file bankruptcy and whether or not you can continue to afford your mortgage.

Why does equity matter?

Equity is what trustees will be looking at when it comes to the matter of whether or not you can keep your home. Essentially, equity is the difference between the balance on your mortgage or any home equity loans and the market value of the property. Many people who file a Chapter 7 bankruptcy end up having negative equity on their property. If this is the case, you will be able to keep your home.

However, if you happen to have equity that exceeds the limit, it is possible that you will need to sell your home in order to cover your debts. If this is the case, you may be able to purchase the home back after you sell it.

Can I afford my mortgage?

For some Chapter 7 filers, losing their home may be a blessing in disguise. In fact, filing a Chapter 7 bankruptcy and losing your home is one of the few times that you can walk away from a mortgage with relatively little penalty if you cannot afford the mortgage. If you can afford to pay the mortgage after your Chapter 7 filing, then you will have no problem keeping your home.