The moment you file for Chapter 7, a bankruptcy estate is created. Almost all of your assets, including your home, become part of the bankruptcy estate. The court has the power to administer all property of the estate in your case.
If you no longer wish to keep your house, you can surrender it (give it back) in your Chapter 7 bankruptcy. Read on to learn more about what happens when you surrender your house in Chapter 7 and how it can benefit you.
If your home has no equity (meaning the balance of your mortgage or other liens exceeds the value of the house), it is safe in Chapter 7 bankruptcy. This is because the trustee is not interested in selling a property that will not benefit your unsecured creditors.
If you reaffirm your house in bankruptcy when it’s underwater (it’s underwater if you owe more to the lender than the house is worth), you may end up being responsible for paying the deficiency balance if you later default on mortgage payments and the lender forecloses. While there are some benefits