Should I Keep My House In A Bankruptcy Filing?

13 Jul Should I Keep My House In A Bankruptcy Filing?

With all the news stories about the foreclosure crisis and with the available programs for folks to try to maintain their house, a more basic question arises–should I even keep my house in a bankruptcy filing? To be sure, this is not a decision to be made lightly and only after exploring all available options. But when there are no options available, you must realistically assess whether keeping your home is feasible financially. But, more importantly, is it emotionally feasible?

Just to recap, often a typical chapter 13 filer is behind on their house payments by a few months. The debtor then tries to catch up or cure the arrearages (that is, the amount they are behind) to the mortgage company by making a payment to the chapter 13 trustee. The chapter 13 trustee pays money to the mortgage company while the debtor continues to make his regular house payment. At the end of the chapter 13 plan, the debtor is current on his house payment and continues to make his house payment after his chapter 13 case is over and discharged.

As is often the case, debtors struggle with their mortgage payments for a variety of reasons. Perhaps the house requires more maintenance than the debtor can realistically afford. Perhaps heating and cooling the house have become too expensive. Perhaps the house payments have become (and possibly always were) too much of a financial burden. Now, just making the house payment puts a serious crimp on the family’s finances–house payment or groceries–a tough choice, indeed.

Understandably, people are attached to their houses. It is more than just a thing to possess, it is home. It is where the kids opened their Christmas presents; where they learned to ride their bicycles, it is — home! Because of this, people will struggle like crazy to make that house payment and almost kill themselves in the meantime. But when it still looks as if keeping the house payment current is creating family stress, or creating health issues related to overwork because you’re trying so hard to maintain your home, sometimes it is time to say goodbye to the house.

Over the years, I’ve had to counsel debtors that, perhaps, it is time to surrender a home because it is just more than they can afford and they are killing themselves trying to maintain the house. While these are tough conversations and emotionally draining, invariably, a few months or even a year later, after the debtors have allowed the house to go back to the bank, the debtors express a sense of relief that they are no longer tied to that house payment. They often say they feel more financially free and emotionally stronger now that the struggle of maintaining the house is over. I’ve often heard it said that if they had known how good it felt not to be tied to that house payment, they would have given the house up long ago.

Again, I do not advocate surrendering one’s home without exploring all available options, but with options exhausted, sometimes surrendering a home is just the cure for financial exhaustion.

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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