Many people fear the prospect of filing bankruptcy. No matter how dire their financial straits, they may worry that they will lose most of their assets – including their home – during proceedings. In some cases, this happens. Yet, if you find yourself in this position, losing your home is far from guaranteed. You may be able to keep it depending on which chapter of bankruptcy you file and whether you can afford your mortgage payments.
Keeping your home after filing Chapter 7 bankruptcy
If you file Chapter 7 bankruptcy, you will forfeit any nonexempt assets you own to a bankruptcy trustee during proceedings. The trustee will then sell off these assets to repay your creditors. Yet, because Minnesota has generous bankruptcy exemptions, your home may avoid this fate. Under these, you can exempt up to $420,000 of equity in your home during bankruptcy proceedings, so long as it is on no more than 160 acres of property. If your home meets these criteria, you will be able to keep it if you remain current on your mortgage payments.
Keeping your home after filing Chapter 13 bankruptcy
If you file Chapter 13 bankruptcy, you will follow a plan to repay your secured debts – including your home’s mortgage – over a period of three to five years. You may want to consider Chapter 13, then, if you have over $420,000 of equity in your home and can afford your monthly mortgage payment. While your home’s equity would cause you to lose it under Chapter 7, you could keep it through this arrangement. Yet, if you fail to make your mortgage payments, you can still lose your home under Chapter 13.
Protecting your home during bankruptcy may seem difficult. Yet, there are ways you can keep it whether you file Chapter 7 or Chapter 13. An attorney can help you understand which option makes sense in your situation.