Will I lose my home if I file bankruptcy?

This is a very important question for many families considering bankruptcy. The answer to the question turns on two issues.

First, is the amount of equity you have in your home. Equity is determined by subtracting the amount you owe against your home from the amount that it is estimated to be worth. For example, if you owe $240,000 against a home that is valued at $260,000, then you have $20,000 of equity in your home. Under the bankruptcy laws, I can protect up to $300,000 of equity in a home for Minnesota residents. If you have less than $300,000 of equity in your home, the bankruptcy court will allow you to keep it. 

The second issue to take into consideration is whether you are current on your mortgage payments. Remember that there are two types of bankruptcy for consumers: chapter 7 and chapter 13. If you file for chapter 7 bankruptcy and you are behind on your monthly mortgage payment, the mortgage lender will eventually request that the court allow them to move forward on the foreclosure process. In this way, you could lose your house. I typically advise clients who are behind on their mortgage payments to either bring them current (if possible) or consider pursuing a loan modification prior to filing bankruptcy to avoid foreclosure. However, if you file a chapter 13 bankruptcy, you can bring the mortgage payments current by rolling the arrearages into the payment plan. As long as you can continue to make your monthly payments under the plan, the mortgage lender cannot foreclose on the home.

For most families, their home is their most important consideration. Even if you are behind on your home and are considering filing chapter 7 to get a fresh start from your debt, schedule a free consultation with Mike to learn more about how bankruptcy affects loan modification programs before filing to ensure your goals of keeping your home are met.

This content is not meant to constitute advice of any kind, including without limitation, legal advice of any kind. If you require advice in relation to any legal matter you should consult an appropriately qualified lawyer.

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