When you lose control of your finances, you may start thinking about bankruptcy and whether filing for it might help you find some relief. However, you may also have concerns about how doing so impacts other areas of your life, such as your home.
If you own your home, you may have specific fears about whether you might lose it once you file for bankruptcy. However, there is no single yes-or-no answer to this question. Instead, it depends on certain variables, including what type of bankruptcy filing you make.
Chapter 7 bankruptcies
If you file for Chapter 7 bankruptcy, there is a chance you may have to turn over your home to pay back your creditors. However, this is not definite and depends on how much non-exempt equity you have in your home and whether you are current on your mortgage payments. If the equity you have in your home is fully exempt, you may be able to hang on to it despite filing for Chapter 7.
Chapter 13 bankruptcies
The odds of you being able to keep your home often improve if you file for Chapter 13. With a Chapter 13 bankruptcy, you restructure your existing debts so that you are able to manage them and pay back at least some of what you still owe. If you stick to your payback plan and keep up with your mortgage payments, your home typically remains safe.
Sometimes, it makes sense to turn over your home during a bankruptcy filing, even if circumstances do not force you to do so. Whether this makes sense might depend on how much your home is worth and how much you still owe on it, among other considerations.