Can I Keep My House If I File Bankruptcy?
Ultimately it depends on your circumstances. It mostly depends on three factors: (1) which chapter of bankruptcy you are filing, (2) whether or not you can continue to pay your mortgage payments, and (3) whether or not you can exempt any equity you may have.
Chapter 7 bankruptcy is likely the best option if you can exempt any equity you may have. Federal Bankruptcy law and Michigan common law contain homestead exemptions that allow you to keep a certain amount of value in your home despite filing bankruptcy. Chapter 7 provides a quicker way to wipe out your debts without having to make plan payments, like in Chapter 13. Keep in mind, however, that any non-exempt assets will be recovered and sold by the Trustee in Chapter 7 (Learn about exemptions here).
Remember, you must be able to afford your mortgage payments going forward, or else your mortgage company could foreclose. Foreclosure is a process that even bankruptcy cannot always stop (Learn about foreclosure here).
If you have DO HAVE non-exempt equity in your home, even if you are behind on your mortgage payments, Chapter 13 may be right for you.
In most cases, you may keep your home in Chapter 13 bankruptcy. Chapter 13 allows for payments to be made on missed mortgage payments through a repayment plan, even if you have equity in the property. Repayment plans are generally 3-5 years, which provides breathing room for many debtors to catch up on their late payments. The Automatic Stay protects you from foreclosure as long as you make your plan payments in full and on time.
Another benefit of chapter 13 is getting rid of second mortgages. In some cases, when the first mortgage balance exceeds the value of the home, a debtor may remove the second mortgage from the home through an action called “lien stripping”. A successful lien strip allows the second mortgage holder to be treated as an unsecured creditor, which generally gets paid much less through your repayment plan.
In some cases, you may keep your home if you file bankruptcy. Each case is unique, however, and the information provided above could not possibly cover every possible scenario. The information above is general in nature, and you should speak to a licensed bankruptcy attorney in your jurisdiction before filing bankruptcy.
DISCLAIMER: The information contained above is general in nature and provided as reference material only. This information is not specific legal advice about the application of the law to a particular fact scenario, nor does it replace (or purport to replace) any requirement to obtain specific legal advice. This information is not intended to and does not create an attorney client relationship. If you require legal advice, that advice should always be obtained from a qualified legal practitioner in your jurisdiction.