Declaring bankruptcy can be a very stressful time. It is likely that you have multiple financial concerns weighing on you, and you may be afraid of losing your assets during the bankruptcy process.
However, whether or not you will lose your home if you file bankruptcy depends on the type of bankruptcy that you file and your particular situation. According to FindLaw, you are only at risk of losing your home if you file a Chapter 7 bankruptcy and have positive equity in your house.
What type of bankruptcy will allow me to keep my home?
The two most common varieties of bankruptcy that individuals file are Chapter 7 and Chapter 13. Chapter 7 is a liquidation bankruptcy, and through this process your assets will be forfeit to your creditors in order to wipe your debts out. In certain situations, you may lose your home if you file a Chapter 7 bankruptcy.
A Chapter 13 bankruptcy is a reorganization bankruptcy. With a Chapter 13 bankruptcy you will confer with your creditors to come up with a payment plan. You will keep all of your assets so long as you stick to the payment plan. However, you need to have a certain level of income to qualify for a Chapter 13 bankruptcy: it is more common for people to file a Chapter 7.
How does equity matter?
Equity is the difference between the market value of your property after subtracting your mortgage and any home equity loans. If this number is positive and you file a Chapter 7 bankruptcy, you may need to liquidate your home as part of the process. However, if you have negative equity in your home, it is likely that the courts will exempt your house from liquidation.