How Does Chapter 7 Bankruptcy Affect My Existing Mortgage? When you file Chapter 7, your existing property will be deemed either exempt or nonexempt. Exempt means you’ll be able to keep the property throughout the bankruptcy process, as long as you can catch up and stay current on your payments.
Although Chapter 7 bankruptcy gets rid of your personal liability on your mortgage, the lender can still foreclose if you stop paying. Filing for Chapter 7 bankruptcy will wipe out your mortgage loan, but you’ll have to give up the home. So, if you want to keep the house, you must continue paying your mortgage payment.
What happens to your house if you file Chapter 7 bankruptcy?
If your exemptions adequately cover your equity, the trustee won’t sell your home in a Chapter 7 bankruptcy. However, if your exemptions protect only a portion of it, the trustee will sell the house, pay off the mortgage, give you the amount you’re entitled to exempt,…
What can you keep in a Chapter 7 bankruptcy?
In a Nutshell. Chapter 7 bankruptcy exemptions allow you to protect property during your bankruptcy. Usually these exemptions allow you to keep most of your day-to-day property. Written by Kristin Turner, Harvard Law Grad. Updated December 28, 2020. Table of Contents.
Can you sell your house if you file for bankruptcy?
If you don’t have any equity, you’re in good shape—trustees don’t sell houses without equity. Otherwise, you’ll need to be able to protect your equity with a bankruptcy exemption to avoid losing the home in Chapter 7 bankruptcy. Learn more about filing for bankruptcy if you have equity in your home.
Can a person exempt their home from bankruptcy?
How much property you can exempt in bankruptcy depends on the exemption laws of your state. To protect the equity in their homes, most debtors use a homestead exemption (if offered by their state). But you can typically only use the homestead exemption to protect the equity in your principal residence (your home).
