According to SFGate, the general rule in a Chapter seven bankruptcy case is if you are current on your mortgage payments and you can show that you have the ability to pay, then you may be entitled to keep your home most of the time. If you are, however, behind on your mortgage payments and you are thinking about filing for bankruptcy, you should probably go ahead and do a modification of your bank note with your mortgage company before you consider filling for a chapter 7 bankruptcy.
There is a case that was recently decided by the courts, and it was in the case of Andrea Bony. The case was decided in the state of Texas, but it is in all jurisdictions. One of the things that the court looked at in that particular case was the client’s ability to pay. In that case, the court would not approve of reaffirmation agreement. According to FindLaw, a reaffirmation agreement is simply a new contract between you and the mortgage company that will exist after you finish your bankruptcy case. And so in the Bony case, the client could only show that they had $500 a month of income. However, the mortgage payment itself not including any other expenses was over $1200.
And so, in that particular case, the court held that there was an undue hardship that would be imposed upon the debtor if the court were to approve the reaffirmation agreement. In the Boney case, Miss Bony was not allowed to keep her house because she could not even show enough money to make the mortgage payment, much less her other personal necessary living expenses.