Going through bankruptcy may end up being the best decision that you ever make for your financial and mental health. However, there are some concerns that come up during the process.
One of the more common concerns relates to the process of selling off property in order to control debt. Many believe that they will lose their home if they go through the bankruptcy process. According to FindLaw, this is not always the case, as it depends on the type of bankruptcy that you file and also other mitigating circumstances.
What bankruptcy puts my house at risk?
The most common variety of bankruptcy that individuals file are Chapter 7 and Chapter 13. Chapter 7 is the liquidation bankruptcy, while Chapter 13 is a reorganization bankruptcy. Essentially, with a Chapter 13 bankruptcy the debtor follows a payment plan in order to keep their property and address their creditors. In a Chapter 7 bankruptcy, the debtor will liquidate non-exempt property in order to pay off the creditor.
Between Chapter 7 and Chapter 13, Chapter 7 is more commonly filed because many individuals do not have the income required to follow a payment plan.
If I file Chapter 7, will I lose my house?
The answer to this depends on the equity in your house. This number is the value of your home with the balance on any equity loans or mortgages subtracted. If this number is very low or negative, your property is exempt and you will be able to keep it. However, if the equity is above the exemption limit, it is possible that you will either need to sell your house and buy it back or simply liquidate it.