For many veterans, filing bankruptcy may be the first step on the path to financial wellness. The most common personal bankruptcy in the United States is a Chapter 7 bankruptcy, also known as a “liquidation” bankruptcy.
It is possible to file Chapter 7 bankruptcy and lose your house, but this is not always so. According to FindLaw, if you file a Chapter 7 bankruptcy, whether or not you lose your house depends on the level of equity you have.
Would I lose my home with a Chapter 13 bankruptcy?
The other common personal bankruptcy is a Chapter 13, or a “reorganization” bankruptcy. In Chapter 13, you will not lose your home.
However, in order to qualify for a Chapter 13 bankruptcy, you must have income above a certain threshold. If you do not have an income which enables you to pay your creditors through an established payment plan, you will need to file Chapter 7.
What governs whether I keep my home with Chapter 7?
The key to keeping your home through a Chapter 7 bankruptcy process lies in your home’s equity. Equity is the difference between the value of your home after subtracting mortgages or home equity loans. It is common for people who file Chapter 7 bankruptcy to have negative equity in their homes. If this is the case, you will be able to keep your home.
In the event that your equity is positive, it is possible that the courts will liquidate your home as part of the bankruptcy process. However, it is also possible for you to purchase your home back by paying the value of your home if this is possible for you.