When people buy a house, they probably consider it the biggest investment of their life to that point. It is probably also their largest debt. For homeowners facing Bankruptcy, the most important question they have in initial meetings with lawyers is whether they will be able to keep their house after they file. One important thing to remember is that very few people lose their house for the mere reason that they filed a Bankruptcy case. Most people who lose their house after a Bankruptcy case do so for the simple reason that they just cannot afford to pay for it and this would be the case regardless of a Bankruptcy filing. Of these people, quite a few are happy and relieved to get out from under a massive debt that is bogging them down. A second key point is that virtually all lenders would rather have your money than your house. They have all the houses they want or need so they do not need yours. Here are a few of the most common scenarios:
- If you file a Chapter 7 case, and are current on your house payments, you probably will be able to keep your house by continuing to make timely payments. At some point in the future, you may or may not want to refinance if you are concerned that the lender may decide to foreclose down the road.
- If you are in a Chapter 7 case, and you are behind on payments, and unable to make up the missed payments over a few months, chances are a little greater that the lender will file a motion for relief from the automatic stay so they have the option of foreclosing.
- If you file a Chapter 13 case, are current on your payments and you have the ability to make timely payments gong forward, chances are excellent you will be able to keep your house. Courts are unlikely to allow lenders to begin foreclosure proceedings during the life of the plan, so if you make all required payments to the lender and the Chapter 13 Trustee, you should come out of the case in good shape and back on track.
- If you file Chapter 13 and are behind on your payments, you will have the opportunity to make up those missed payments in your Chapter 13 plan (in addition to making your regular monthly payments). This is one of the most powerful tools in Chapter 13, even for those who qualify for Chapter 7. However, if your arrears are so high that you do not have enough income to make the missed payments up in a 60 month plan (in addition to your regular monthly payment, living expenses, etc.), you will likely have to make a decision on whether or not to give up the house or dismiss your Chapter 13 case and consider another alternative.
- In very unusual cases, you may have enough equity in your house that the Chapter 7 Trustee might try to sell it. The amount of available equity that it takes to get to this point is probably far more than you think, so even if you have $20-25,000 equity over and above your exemptions, you are probably just fine.
- An individual Chapter 11 is more complicated than 7 or 13, and an individual debtor often has more leeway in a Chapter 11 Plan. However, it is similar to a Chapter 13 in that the debtor normally has to be able to continue making regularly monthly payments and make up any missed payments in the plan.
Although these are the common scenarios, the reality is that each case is a little different. Several other factors may come into play: 1) Can you strip a junior lien, 2) Have you filed previous Bankruptcy cases to stop a foreclosure, 3) Are you going to reaffirm the loan, or 4) Should you keep the house even if you can make payments? In addition, whether or not you are eligible to get a loan modification in the near future may be important. Finally, it is important to note that even if a lender gets relief from the automatic stay it does not mean they are going to foreclose any time soon. They still have to follow all state law procedures for foreclosure, and they still would rather have your money than your house. If you are concerned about your house and a possible Bankruptcy, contact a Georgia lawyer here or find a good lawyer in your area to discuss the specific details.