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If you have had to file bankruptcy because of financial difficulties you will need the answer to ‘Can I keep my house if I file Chapter 7?’ Chapter 7 is one of the types of protection that is available to the debtor who is seeking protection from the legal system from creditors who are trying to collection past due debt. In bankruptcy filings you may be required to sell your assets, including your home, to satisfy the request of the creditors for payment of your debt. Two things will determine whether or not you will lose your real estate. One, the value of the home in which you live and the state within which you reside is number two. The state writes the guidelines that the court must follow under the bankruptcy code the federal government enacted. Even though the judge may not order you to sell you home to satisfy your debt, you may still lose the property through the foreclosure process after your bankruptcy proceedings are over.

When you initially file for the protection of the court, the judge will order a stay on the collection proceedings that are in process. This means that the creditors cannot continue to try to collect on the debt while this temporary order is in effect. If you have not stayed current on your home loan, as soon as the judge lifts the stay, the lender will probably continue with the repossession of your home. Most of the debt that is discharged, or forgiven, in the court petition, is debt that does not have any collateral. This is debt like your credit card accounts or any other accounts that have no tangible assets to repossess and sell if you have not paid what is due. As a general rule, you can keep your house if you filed Chapter 7 because the real estate is the security, or collateral, for the note. If the debt is discharged during the proceedings, then you will have to vacate the house because you were forgiven the debt and you will have to return the home to the lender.

Each state has written guidelines that govern the bankruptcy filings. Some states allow exemptions on some of your assets when you file for debt forgiveness. Here’s an example: In Florida, you can claim a homestead exemption on your home when you file Chapter 7. Tennessee, however, states that if you are single you can only exempt $5,000 of your home. Homestead exemption is the amount of money that remains when the debt against the home is deducted from the fair market value. If you owe more on the note that the fair market value of the home, you can keep your house if you file Chapter 7.

Sometimes the state will have guidelines that determine if you can retain possession of the home of you have the ability to make the payments. This is called reaffirmation and you will be required to sign an addendum to your mortgage that is an agreement with the lender that you will continue to make the home loan payments. The court may have dismissed your obligation, but you are essentially resigning the note with the lender and you will retain your home if you stay current on the payments. If you default after the bankruptcy and after you have reaffirmed the home you will be held liable for the debt and you will not be able to go back and claim the safety of the bankruptcy proceeding.

There is one other type filing that you can petition the court under the bankruptcy code and it is called Chapter 13. This is a type filing that is designed to reorganize, or renegotiate your debt with the creditors, so that you can make the payment. Sometimes the amount of the debt is reduced or the length of time for repayment is changed so that you can afford the payments. You will be allowed some time of up to five years to catch up the payments and stay current on your debt payments. This will protect all your assets for that length of time. If you are in arrears on your mortgage at the time of the court filing, you will have to pay the outstanding amounts and remain current on your home loan payments if you intend to stay in your home. You can keep your house if you file Chapter 7 but you will be required to meet the conditions of the lender and the court in order to do so.