Can I File Bankruptcy on My House?
The dire state of the housing market in the U.S. right now means that, more than ever, people are struggling to make their mortgage payments and looking for ways to stay in their homes as job loss and high-cost loans push them toward the door. Your home, like many of your other assets, can be included in a bankruptcy filing.
If you're struggling with your mortgage, bankruptcy may be an option to help you regain control of your finances. If you would like to speak with a bankruptcy lawyer about your options for filing bankruptcy, please fill out this form and arrange a free initial consultation with an attorney near you.
Your House and Filing for Bankruptcy
So the question stands: Can you file bankruptcy on your house? The answer is complex, but here's an outline.
- The automatic stay: Once a bankruptcy petition is filed, a legal protection called the automatic stay goes into effect. As soon as you file your case with the court, the automatic stay takes effect and prevents creditors from taking collection action of any kind. This includes wage garnishment, repossession and even foreclosure. The automatic stay remains effective for the duration of your case.
- Chapter 13 bankruptcy: If you file for Chapter 13 bankruptcy, your case should remain active for three to five years while you make payments according to a plan agreed upon by you, your creditors and the bankruptcy court. During this repayment period, the automatic stay can prevent your mortgage lender from taking steps to foreclose on your home, meaning that you may be able to, at the very least, buy yourself time when trying to keep your home.
- The repayment plan: If you file bankruptcy, you will have the three- to five-year period of the repayment plan in which to catch up on your past-due mortgage payments while staying current on monthly payments as they come due.
- No mortgage modifications in bankruptcy: Unfortunately, the bankruptcy court does not have the authority to modify the terms of a home mortgage loan. Filing for bankruptcy will not change the terms of your mortgage, but it may give you the ability to catch up on payments.
- Home equity in Chapter 7 bankruptcy: If you file under Chapter 7 of the Bankruptcy Code, you won’t have to follow a repayment plan; rather, the court will simply discharge your eligible unsecured debts while protecting some of your assets (home equity is often included). This might mean that your money is adequately freed up to stay current with your mortgage; however, if it does not, you may have to figure out alternate living arrangements. Your state's bankruptcy laws will play a part in deciding if Chapter 7 is a viable solution for you.
Can I File Bankruptcy on My House and Nothing Else?
So what happens if you're in pretty good shape overall with your debt but you have an unmanageable mortgage on your hands? Unfortunately, you cannot file bankruptcy to discharge a single debt. If you choose bankruptcy, you must include all your debts. Although some debts (like student loans and child support) are not typically discharged in bankruptcy, the court will need to know about them to get an accurate picture of your finances.
Learn More about Your House in Bankruptcy from a Lawyer
If you're ready to find out the potential fate of your home and mortgage in bankruptcy court, take this opportunity to connect with a bankruptcy lawyer.