Chapter 7 Bankruptcy - What Happens to my Home After I File?

People filing Chapter 7 bankruptcy are concerned about how bankruptcy will affect the ability to keep or sell a personal residence.

After filing a Chapter 7 bankruptcy you will have options regarding what you want to do with your home.

If you decide that you want to stay in your current home there are some factors that have to be considered.

• First, does your home have equity?
  • Maryland offers a homestead exemption that allows a person or married couple filing bankruptcy to exempt $22,975.00 of equity. 
  • This is an issue  because the trustee has the ability to sell your home if there is equity that is not exempt.  If you do not have equity in your home then this is a non-issue.  
    
    
• The next question: are you behind on your mortgage?
  • The bankruptcy rules allow you to continue to stay in your home as long as you keep your mortgage payments current.  If you fall behind, then the mortgage company maintains the right to foreclose.  
  • The bankruptcy will protect you from being personally liable for whatever money the bank lost as a result of the foreclosure sale.
  • If you maintain your mortgage payments after bankruptcy, you will be able to stay in your current home without issue following a Chapter 7.
    
    
• What if you just want to be done with the property?
  • Sometimes it is just easier to walk away from a bad mortgage.  A bankruptcy discharge allows you to walk away from a home without fear of personal liability for any foreclosure debt that the lender might incur from the foreclosure and sale of your home.
  • You are still personally liable for taxes, condo/hoa fees and insurance on a property until your name has been removed from the title and ownership has reverted back to the bank.  If these debts accrue after your discharge, you will be personally responsible for them.  
    
    
• Is there a way to have the bank take the house back quicker than foreclosure?
  • Yes, after bankruptcy a common request that can be made with a lender is permission to sign a Deed in Lieu of Trust.  What this does is transfer title of the property back to the bank without the need for the foreclosure process.  You are essentially signing title back over to the bank. You might be reimbursed by your lender as a perk to sign the Deed in Lieu.

Ultimately, each individuals situation is different and the only way to give you a clear idea of your situation is to call and schedule a free initial consultation.

Call (301) 513-0500 or Email Today.