How Can I Keep My House In Bankruptcy?

Most people want to keep their home when they file a Chapter 7 Bankruptcy.   If the property is free and clear, Ohio law gives each debtor a $21,625.00 exemption for equity in a home.  This means that if a couple files together, they can combine their exemptions for a total of $43,250 in home equity.  This assumes that both parties have their names on the deed or manufactured home or trailer.

Most people have mortgages on their homes.  So, if a couple had a $100,000.00 mortgage on their home, they would be allowed to keep their home if it was worth less than $143,250.00.  Occasionally, an appraisal is necessary, before the bankruptcy is filed if it looks like a close call.

Occasionally your attorney will recommend a “reaffirmation” of your mortgage or mortgages during your bankruptcy.  This is sometimes done if the value of your home is greater that the total of the mortgages.  Reaffirmations are very serious and require the advice of an attorney.  This is because once you reaffirm on a debt, you can never get away from it, except by paying it in full.

More often we advise clients to simply “retain and pay” for the home.  That means that you stay in your home and keep on paying the mortgage as usual, without reaffirming.  Banks are usually very happy with this arrangement.  They have enough forclosures and are unwilling to file for foreclosure as long as payments are absolutely current. If you are behind on the mortgage payment, you will have to find a way to get current while you are inside the bankruptcy.  Your attorney can help you find ways to do that.

The great advantage to retain and pay is that you no longer have a personal obligation to pay the mortgage.  You can stop paying at any time in the future and NOT have any deficiency judgment against you.  This is hard to understand, but true.  You may want to discuss this with your attorney.

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