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Does filing for bankruptcy lead to the loss of your home?

On Behalf of | May 5, 2023 | chapter 7 bankruptcy |

When your finances begin to spiral beyond your control in Maryland, you may start looking for ways to reestablish financial stability. Depending on how much debt you find yourself in and how much income you have, filing for bankruptcy may help you accomplish this goal. However, many people considering filing for bankruptcy hesitate because they have fears about potentially losing their homes in the process.

Per Rocket Mortgage, the act of filing for bankruptcy does not automatically put your home at risk. Instead, whether you are able to keep your home depends on certain factors, such as how much equity you have in it and what type of consumer bankruptcy filing you initiate.

Handling the mortgage with a Chapter 7 bankruptcy

The majority of people who file for bankruptcy do so via a Chapter 7 format. However, to file for Chapter 7, you have to prove that you have limited means, and this requires passing a means test. Whether you may hang on to your home in a Chapter 7 bankruptcy depends on whether it is an “exempt” or nonexempt” asset. Certain variables help determine this, including the amount of equity you have in it and how long you lived in the home.

Handling the mortgage with a Chapter 7 bankruptcy

When you file for Chapter 13, you agree to a particular payback plan. As long as you stay on top of the plan and also keep up with your mortgage payments, you should not have to surrender your home during bankruptcy proceedings.

There are benefits and drawbacks associated with both types of consumer bankruptcy filings. If you want to file for Chapter 7 but do not qualify to do so, you may try again once six months have gone by.

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