Will I be able to keep my house when I file for bankruptcy? It’s a common concern that you may wonder about as you are making preparations to file for bankruptcy. It could be that you are facing a daunting foreclosure and want to file for bankruptcy in order to save your house. Or, you could have a perfect record with your mortgage company because you have always made your mortgage payments on time, and you do not want the bankruptcy to affect that and cause you to lose your house. These are all valid concerns that many people who file for bankruptcy have.
After filing for bankruptcy, you will be able to keep your house, regardless of whether you file a Chapter 7 or a Chapter 13 bankruptcy, so long as you keep making your mortgage payments on time. If you are paying your mortgage company on time, then you can rest assured that you will be able to keep your house during the bankruptcy. You see, when you file for bankruptcy, your attorney who is helping you file your case, will apply one of two different laws to protect all of your assets – federal law or state law. The type of law that is applied to your case depends in part on whether you own a house with a significant amount of equity, or whether you are renting a house or an apartment. Federal law will be applied to protect your house and all of your assets, if the equity in your house falls within the threshold value allowed by the homestead federal statute. If the equity in your house exceeds that value, then Minnesota state law will be applied instead. The reason that federal law is usually favored, is because federal law has a wildcard provision that protects up to $13,900 worth of assets. This provision provides greater protection is protecting all of your assets. Therefore, your house is protected, whether federal or state law is applied, so long as you continue to make your mortgage payments.
If you are facing foreclosure due to mortgage arrears, a Chapter 13 may be the better option for you, over a Chapter 7. Chapter 13 bankruptcies have the ability to cure your mortgage arrears. A Chapter 13 bankruptcy works as a government sponsored debt consolidation program, but there are benefits. You are making one, single payment to your bankruptcy trustee’s office, to take care of all your debts. After your first payment, you can set up for monthly automatic payments to be withdrawn from a bank account of your choice, and you can choose a date of the month for those withdrawals to be made. The benefits of a Chapter 13 over a debt consolidation program are that your payments each month are actually affordable, you will have the guarantee to be out of debt in 3-5 years, when you receive your bankruptcy discharge, and most of the time, you are only paying a tiny portion of your unsecured creditors. The payments each month in a Chapter 13 are affordable because you are not paying interest, such as in a debt consolidation program. Moreover, the key is that bankruptcy was designed to be a remedy, to help those who want help to be in a better financial situation than they are in right now. Thus, payments in a Chapter 13 are affordable because that is the purpose for which bankruptcy was designed. Chapter 13 bankruptcies are also able to cure mortgage arrears. That one, single payment each month includes any mortgage arrears that you have. Thus, if you are facing foreclosure, a Chapter 13 will cure your mortgage arrears since you will be paying that off through your Chapter 13 monthly payments. At the same time, your house will be protected, so long as you keep making your monthly mortgage payments on time moving forward.
If you are in good standing with your mortgage company and have always made your mortgage payments on time, and do not have any mortgage arrears, then you simply have to continue making your mortgage payments on time. Your bankruptcy attorney will decide which type of law is best to be applied to your case to protect your house and all of your assets. If you have always been set up on automatic mortgage payments to your mortgage company through a bank account of your choice, that may be shut down once your case is filed. If that is the case, your mortgage company may request that you temporarily make your mortgage payments through an alternative method of payment. As long as your mortgage company is receiving your payments through an alternative method of paying, then you can rest assured that your house is protected and you will keep your house during the bankruptcy.