Your Home in Bankruptcy

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Many homeowners look to bankruptcy to relive them of an overwhelming amount of debt. Inevitably, the question always arises, "will I lose my house if I file bankruptcy?". The answer depends on the particular circumstances of your situation.

Bankruptcy is only interested in the equity you have in your home. If you're one of the many people who have become "upside-down", meaning your mortgage is greater than the value of your home, then bankruptcy will have little effect, and as long as you can maintain your mortgage payments the house will remain yours.

Also, if you're facing foreclosure, then bankruptcy can temporarily "stay" the foreclosure proceedings and give you valuable time to evaluate your options. For many, walking away from their mortgage during bankruptcy might make sense, because bankruptcy will prevent you from winding up owing your lender money from a "deficiency". A deficiency arises when your home is sold by the bank for less than the mortgage amount. When this happens you may be on the hook for that difference, which can be substantial. In bankruptcy, you're relieved from that debt.

Conversely, if you're one of the lucky few that does have positive equity in your home, then you'll need to cover that equity with your states homestead exemption. To find your states homestead exemption, see Bankruptcy Filings in Your State.

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