Can You Keep Your Home If You File For Bankruptcy

Bankruptcy has become inevitable for many Americans who are swimming in debt, and the reason for their debt is often a burdensome mortgage payment. However, even if you are broke, you still need a place to live. In some cases, people who go bankrupt can hang on to their homes, depending on the type of bankruptcy they file.

The state in which you file matters. "Homestead exemptions" might help protect your home if you go into debt. For example, if you live in Florida, you may be able to stay in your home as long as you can prove it is your primary residence. However, you cannot buy a home in Florida, move there and file for bankruptcy. You need to prove that you have lived there at least 40 months.

Don't try to hide the existence of your house. Don't attempt to transfer it to anyone else or conveniently neglect to mention it. Illinois bankruptcy lawyer David Leibowitz of LakeLaw advises, "Transferring a home to another member of the family is not a realistic option.  If there is equity in the house, that's a fraudulent transfer which could be avoided by the bankruptcy trustee. If there is no equity in the house, then transfer or not, one won't be able to keep the home without payments being current unless the lender otherwise agrees."

File for Chapter 13 bankruptcy. When you file for Chapter 7, all your assets go to your creditors. However, Chapter 13 bankruptcy is based on the premise that you have income and that what you really need is a little space to get your financial act together. With Chapter 13, you will pay back your creditors in installments, determined by the court, so you can keep your home. However, you cannot emerge from a Chapter 13 bankruptcy if you cannot make those monthly payments.

Find out if Chapter 7 is an option. According to Jason Kilborn, law professor at John Marshall Law School in Chicago, "In some districts, before some judges, a debtor who has kept up payments and is not in default may keep the home by allowing the mortgage to -ride through' the bankruptcy." He further explains, "Some judges are still allowing debtors to ignore the bankruptcy law and stay in homes as long as there is no default."

Get a lawyer. Although your bank account is depleted, a smart lawyer can help you save some money-not to mention your house-in the long run. He can evaluate your situation and let you know if you should go with Chapter 7 or Chapter 13 bankruptcy.

Related Life123 Articles

Knowing when to file bankruptcy is a difficult decision.  Filing bankruptcy may or may not make sense for your personal situation, depending on a variety of factors.

Many people see bankruptcy filing as financial suicide. It's a black mark that sticks around on your credit report for 7 or 10 years. However, some people are in such dire financial straits that filing bankruptcy might the best solution. When is filing bankruptcy a good idea?

Frequently Asked Questions on Ask.com
More Related Life123 Articles

One of the downsides of filing Chapter 7 or 13 is that buying a home after bankruptcy is difficult. However, it's not impossible.

Filing bankruptcy without an attorney may be an option if can't afford legal help.  You'll be happy to know that you can legally file bankruptcy without an attorney. It takes a lot of effort and knowledge to do so, but it can be successfully done.

When your financial situation has gotten so bad that trying to find out how to file bankruptcy is your only option, it's important that you go through the process in the correct way. Do as much research as you can to glean the very best bankruptcy advice from a variety of sources.

© 2014 Life123, Inc. All rights reserved. An IAC Company