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How to Keep Your Home in Chapter 7 Bankruptcy

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For many people, Chapter 7 bankruptcy is the only real option they have of getting out debt. Unfortunately, because Chapter 7 is a liquidation bankruptcy, it often involves giving up everything one owns, including their house and cars. Losing a family home can be devastating, and it is not something many people are willing to go through. As a result, they struggle to save the home by cutting back, working longer hours, and selling off other assets. If you are someone who is bending over backwards so that you can save your home, know that there IS a better way. You can still wipe out your unsecured debt with Chapter 7 and save your home, and the Merrillville bankruptcy attorneys at Whitten & Whitten can show you how.

Option 1: Stay Current on Your Payments

If you can stay current on your payments, do so. Once you file for Chapter 7, all but a few categories of debt will be wiped out. The only loans you will not be able to get rid of include tax debts, student loans, child support, and alimony. Once that debt is gone, you can use the money you were paying towards those debts to put toward your mortgage.

Keep in mind, however, that you should only use this option if there is not a lot of equity in your home. In every Chapter 7 case, the bankruptcy trustee is only interested in finding property that can be sold for a significant amount of money, which is then used to repay creditors. If your home has too much equity, the trustee is going to want it. However, if there is little equity in your home, it will not do much good for anyone, in which case the trustee may leave it alone.

Equity is something you need to consider before filing, as once you file for bankruptcy, you cannot back out. If the trustee does decide that your home has enough equity and that it is worth selling, he or she may do so. However, you will receive the amount you are entitled to exempt, which is $17,600 under Indiana’s Homestead Exemption Act. Any remaining money will go to your creditors.

Option 2: Reaffirming Your Debt

If option one is not a viable route, you may still be able to save your home by reaffirming your debt. Reaffirming your debt means that you promise to repay your mortgage (or another debt) from which you were released in your bankruptcy case. Reaffirming a mortgage means that you recommit to the terms of the loan and reassures the lender that you will repay the debt.

Reaffirmation is a great option for those who anticipate having plenty of money to make monthly payments once all other debts are discharged. However, if you default on your mortgage a second time, you could still be subject to foreclosure, and this time, because you have already filed for bankruptcy, bankruptcy may not be able to save you.

Discuss Your Options With a Merrillville Bankruptcy Lawyer

If you are under severe financial stress and if fear of losing your home overwhelms you, reach out to the Merrillville bankruptcy attorneys at Whitten & Whitten. Our lawyer can help you review your options and figure out a way to get out of your financial hole while still keeping the family home. Call our office today to schedule a free consultation.

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