Chapter 7 Bankruptcy FAQ

If I'm current on my mortgage, can I keep my home in a Chapter 7 bankruptcy?

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Questions:

Answer:

If I'm current on my mortgage, can I keep my home in a Chapter 7 bankruptcy?

You will be able to keep your home in Chapter 7 bankruptcy if all of your equity in the home is exempt. What is exempt equity? Although the Chapter 7 bankruptcy trustee may sell some categories of your property to pay unsecured debtors, you are allowed to keep a certain amount (and certain types) of property. The amount of property you are allowed to keep is called exempt property.

Bankruptcy law in all but a handful of states allows homeowners to keep a certain amount of the equity in their home -- this is called the homestead exemption. The exemption amount varies by state. If all of the equity in your property is exempt, the Chapter 7 bankruptcy trustee cannot use it to pay unsecured creditors and therefore has no reason to sell your home as part of the bankruptcy. As long as you keep current on your mortgage, the home remains yours. To learn more about homestead exemptions and other ways bankruptcy affects your home, see Nolo's article Your Home in Chapter 7 Bankruptcy.

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