Many People Keep Their Homes When They File For Bankruptcy

by Susanne Robicsek, North Carolina Bankruptcy Attorney

April 7, 2009

Home Sweet Home Picture by Susanne Robicsek (2000)

There is a misconception that people who file for bankruptcy will lose their homes.   I hear from many people who avoided speaking to an attorney because ‘someone’ told them that if they file  they will lose everything, including their home.  This is a myth.

  • Many homeowners not only keep their homes in bankruptcy, but many keep their homes because of bankruptcy.

Some people can keep up their mortgage payments better if they don’t have to pay all of their other debts.  If other debts are dealt with, reduced or written off, then the home payments may not be a problem.

If payments are already behind on a mortgage, filing may allow you to get into an affordable payment plan to catch up missed payments.

Chapter 7 writes off certain debts which can free up money to pay for their home.   For others, Chapter 13 can provide an affordable repayment plan.

Chapter 13 can stop a foreclosure and give people time to catch up missed payments so they can keep the home while reducing or eliminating other debts.

Whether or not you can keep your home through bankruptcy is a state-by-state question, since what you can keep varies by the state law controlling the case, also known as exemption laws.

You may have heard about a “homestead” claim.  Some states protect homes 100%, but others limit the protection to a certain dollar amount.  However most states protect at least some home equity from creditors, whether you are sued or whether you file for bankruptcy.

  • Even if your home is worth more than what is protected under your state’s exemption laws, there are still ways to keep your home in either a Chapter 7 and Chapter 13.

Some people are able to keep non-exempt property by paying to keep the property that is over your exemption limit.  This can be done in Chapter 7 through a lump sum payment, or by making Chapter 13 plan payments over time.

Don’t rule out bankruptcy because you are scared you are going to have your home taken away.   Speak to an experienced attorney near you to find out what property is safe, and how to best keep your home.

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Concentrating in Consumer Bankruptcy Law since 1988; Wake Forest Law School JD 1987 Law Office of Susanne M. Robicsek since 1993, Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.

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