Will You Lose Your Home If You Claim Bankruptcy?

Many people fear to claim bankruptcy even if it is the most suitable option for them. They actually fear that they will lose their home if they use this option. Well, it doesn’t happen always, but it is also true that there is no straightforward answer to this question. There are several factors that are taken into account in this regard.

Laws under Different Chapters

In usual circumstances, chapter 13 allows you to keep your home, especially if the court is convinced that you can make the repayment of the mortgage without making further defaults once the repayment terms are restructured. Even chapter 7 may allow you to keep your home, as when it comes to deciding about exemptions, the laws vary from one state to another. In general, if the equity in your home is exempted and if you have the ability to pay the monthly payments, you may save your home.

Circumstances When You Should Willingly Give Up Your House

If you are going to claim bankruptcy, you may come across circumstances when you may like to give up your house willingly. For example, a common situation is when the total liability on you is more than the current market value of your home. In such cases, it does not make much sense to keep your home. Paying more money to your creditors than your house is worth is like financial bleeding, which you must stop as early as possible. However, sometimes, you may still want to keep your home. After all, you need a place to live in. if you do not have an alternate solution, you will be in a deep trouble. Therefore, it is important for you to look into each and every aspect before you make a final decision in this regard.

Can Short Sale be a Better Alternative to Bankruptcy?

If there is no way you can keep your home, you probably will not like to claim bankruptcy at all. There can be several better alternatives that you can try in this regard. For example, some people find short sale a much better alternative to bankruptcy. Short sale refers to the process where you sell your home at a lower price than the amount of money you owe to the mortgage lender; you can do this in complete settlement of the loan. If you owe $400k on mortgage but the current value of your home is only $350k, the lender may agree to accept a short sale where they will keep $350k in settlement of $400k; they will show the $50 deviation as loss on their bookkeeping records.

Overall, the only way you can keep your home even if you are going to claim bankruptcy is when you are willing to make the payments even after getting bankrupt. You must look into each and every aspect thoroughly before you choose your options in this regard.

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Posted in Bankruptcy, Bankruptcy Laws | 2 Comments »

2 Responses to “Will You Lose Your Home If You Claim Bankruptcy?”

  1. katrina says:

    The question that comes in every body mind that is it possible to get credit after bankruptcy.
    There are so many mistakes that lead to bankruptcy. People have to learn a lesson from such types of mistakes. The very first problem which is generally done by the people is overspending on credit cards. If they will not able to pay the amount on time, high rate of interest will be charged, which may be impossible to pay on time. So you should limit your expenditure. A second big mistake is wrong investment decision. People who invest the amount which seems to secure at the first time but suddenly they loss lot of money because of the market fluctuation. So people have to think before any decision. Third mistake is people some time spend all their income. They will not save any for emergency. Since they do not have any contingency fund as a result they did not any thing for rainy day.

    So these are some mistake that every one must be aware about it. Bankruptcy not only reduces the credit score but there is also less chance to get the credit after bankruptcy. There are some points through which we can get the credit after bankruptcy. The first thing that should be done is to improve credit rating. There are some credit weight age factor defined by the agencies in order determine the credit score. Therefore improve your credit score first. Second thing is that make sure that you will not exceed from the credit limit. Make payment on time. Be sure to use the credit cards wisely. Third point is not to depend on credit cards only .use other sources of credit cards and maintain a good relationship with lenders. If we consider all the point we can definitely get a credits after bankruptcy.

  2. kelvin says:

    Really impressed with this article. Home is a very precious thing for every body and if there exists any doubt of losing your one’s home, it does not feel good. Bankruptcy is a very complicated process to understand, there are so many laws in different chapters that are necessary to study. Generally if you are capable to prove that you can do the repayment of your home loan, your home loan can easily be yours, but you have to show a great punctuality for making the payments in time. There may be some situations when you will leave your home yourself because if your home can make you debt free then you will easily sell your home and pay off your debts. But before doing this, arrange an alternative option to live. It becomes very difficult to make your home safe even after getting bankrupt. If you have no other option left then you may go for the settlement program of your mortgage loan but this process also has its own pros and cons so it is very important to study all the aspects thoroughly and then make a decision.

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