Making the decision to file bankruptcy can be a difficult one. However, declaring bankruptcy can be your first step toward a secure financial future.
One of the major concerns people have with bankruptcy is the potential situation of losing their home. While it is possible that you lose property and other assets after filing bankruptcy, this depends on what type of bankruptcy you file. According to Findlaw, while it is possible to lose property if you file a Chapter 7 bankruptcy, in certain situations you can avoid this.
Why would I lose property under Chapter 7?
Another name for a Chapter 7 bankruptcy is a “liquidation” bankruptcy. This is because a Chapter 7 bankruptcy involves liquidating your assets in order to pay off your creditors. This is in contrast to a Chapter 13 bankruptcy where the debtor and creditors agree to a payment plan.
However, whether or not you lose your home in a Chapter 7 bankruptcy depends on how much equity there is in your property. Equity is the difference between your mortgage or any home equity loans and the market value of the house. If this is a negative amount, you will be able to keep your home.
Are there instances where I would want to lose my property?
There are some individuals who choose to liquidate their home during a Chapter 7 bankruptcy. Particularly for individuals who are underwater on their mortgage or unable to keep up with mortgage payments, being able to liquidate the home may be a relief.
Whether or not losing your home through a Chapter 7 bankruptcy is advantageous depends upon your particular situation.