David R. Black Bankruptcy Law Blog on Lawyers.com

Will I lose my house if I file for bankruptcy?

Monday, July 27, 2009 by David R. Black

Will I lose my house if I file for bankruptcy?

As a Philadelphia bankruptcy attorney, I've seen home foreclosure rates in Media and Philadelphia reach unprecedented highs and more and more individuals are forced to consider bankruptcy for debt relief due to job loss, divorce, or mounting credit card bills.

It is important to understand the differences between Chapter 7 and Chapter 13 bankruptcy. In Chapter 7 a person’s assets are liquidated in order to pay creditors, so if you own a home but do not have the income to pay your debts over time you could lose your home and other property. A Chapter 13 bankruptcy case protects exempt assets, allowing the debtor to make installments toward repaying some or all of the debt.

It is more likely that you would lose your house in a Chapter 7 bankruptcy case because in this type of bankruptcy your property is sold in order to pay your debt. Once this is done the balance of your debt is usually forgiven.

A Chapter 13 bankruptcy case, on the other hand, not only enables you to keep your house by restructuring your debt, but the proceedings can be used to save your Philadelphia home from foreclosure. When you file a bankruptcy petition, an “automatic stay” goes into effect, prohibiting your creditors from taking further collection actions against you. This means that you are protected from foreclosure while the stay is in effect and your mortgage company must follow the rules that the bankruptcy laws impose. This gives you some extra time to catch up on your payments. In Chapter 13 you develop a plan for repayment of your debt over a 3-5 year period. It is possible, however, to lose your home if the bank completes foreclosure before you start bankruptcy proceedings, or if you fail to make the mortgage payments under the Chapter 13 bankruptcy plan.

This article was provided courtesy of The Bankruptcy Legal Group, (610) 566-8500, www.thebankruptcylegalgroup.com.

Posted at 11:53 AM

Topic: Bankruptcy