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Can I keep my home after Chapter 7?

Chapter 7 bankruptcy is famously known as a liquidation bankruptcy. This means that, in some cases, it is possible for you to lose your home if you file Chapter 7.

Many people resist filing for a Chapter 7 bankruptcy since they, understandably, wish to retain ownership of their home. The good news is that you will not necessarily lose your home if you file Chapter 7, depending on your circumstances. According to FindLaw, a lot depends on how much equity there is in your home.  

What is equity?

At its simplest level, equity is the difference between the current market value of your home and what the balance is on any home equity loans you hold or your mortgage. Generally speaking, the majority of people who file a Chapter 7 bankruptcy have negative or very little equity in the house.

People who file Chapter 7 bankruptcy and have little to no equity usually get to keep their homes, so long as they can continue to afford paying the mortgage. In the event that you have equity in excess of the exemption limit, you may need to sell the home or buy it back from the bank.  

What if I cannot afford my mortgage?

In the event that you can no longer afford the mortgage payments on your home, filing Chapter 7 is a very good idea. In fact, filing a Chapter 7 bankruptcy is one of the very few times you can “walk away” from a mortgage with essentially no consequences. For some people, giving up their home may be a relief.


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