There are many myths and misconceptions out there when it comes to filing for bankruptcy. You may have heard from others that filing for personal bankruptcy means you have to give up your home during the process, but is this actually true?
According to SFGATE, this is a common misconception many people have, but it is not necessarily true. In many cases, you may be able to keep your home while filing for personal bankruptcy. Whether you may do so depends on several variables, such as whether you file for a Chapter 7 or 13 bankruptcy and whether you are up-to-date on payments.
Why the type of bankruptcy matters
It is more likely that you keep your home when you file for Chapter 13 bankruptcy, rather than Chapter 7. However, filing for Chapter 7 does not automatically mean you lose your home, either. In this type of filing, you may have to liquidate some of your assets to pay off your debts.
Whether you must do so with your home depends on how much equity you have in it and how much you still owe on it. When you file for Chapter 7, you may be able to retain “exempt” property, so you must determine how much of your equity falls into this category.
Why payment history matters
Regardless of whether you file for Chapter 7 or Chapter 13, your chances of keeping your home improve when you keep up with the payments on it. In a Chapter 13 filing, you restructure your debts in a manner that seeks to make them more manageable. As long as you keep up with your mortgage payments and the other elements of your repayment plan, you should be able to keep your home in a Chapter 13 filing if you wish to do so.