Robert L. Scruggs Bankruptcy Law Blog on Lawyers.com

Many individuals who file for bankruptcy are afraid that they will lose their home to pay off their personal debts. Although it is common belief that a debtor’s home will go into foreclosure during bankruptcy, this is not always the case. If a house has no equity, calculated by taking the current value of the house and subtracting the costs of the sale, payoff balances and any liens, the bankruptcy trustee will leave the home out of the bankruptcy estate. By leaving the home out of the bankruptcy estate, debtor and their family can continue living in the house as long as they follow the requirement of maintains mortgage payments.

If the house has equity, it is possible that it will be put into the bankruptcy estate. There are ways to get around losing a house in situations like this such as determining whether the exemptions available to the debtor are equal or are more than the equity in the property. If the exemptions  are equal or greater than the equity, then the debtor will have the choice to keep their house as long as they continue to pay their mortgage. If the exemption is not enough to save their house from going into the bankruptcy estate, the debtor should consider filing Chapter 13, in which a debtor’s income is strictly used to pay back debts.

It is important to know that filing for bankruptcy in Nashville does not relieve the property of any voluntary liens such as tax liens or mortgages. Because bankruptcy does not alleviate the property of any liens, lenders have the right to foreclose on the property, even if it is the debtor’s house, if the payments are not being made based on the agreement. In most cases, as long as the mortgage payments are kept up with, lenders will not foreclose on a house because they do not want to acquire the debtor’s property. When a debtor fails to make their payments, foreclose is the last option creditors will turn to.

This article has been provided by Nashville bankruptcy lawyer Robert L. Scruggs, Attorney at Law, 2525 21st Avenue South, 2nd Floor, Nashville, Tennessee 37212.