Can Chapter 7 Bankruptcy save my house?

Many people want to know if a Chapter 7 bankruptcy can help save their house. It depends on what you mean by "save the house". You won't lose your house in a chapter 7 if you don't have over the allowable amount of equity in the house (homestead exemption), and you are current on the mortgage.  But most people who ask this question really want to know if a chapter 7 will allow them to stop a foreclosure or prevent it from going into foreclosure to begin with. The answer is no. A chapter 7 will delay a foreclosure due to the automatic stay, but the stay only last so long, and during the course of the case itself, the stay can be removed by the bank if they file a motion seeking relief from (or "lifting") the stay.  A chapter 7 is usually only a temporary fix to a pending foreclosure and is not what most people use if they want to save their house. The reason that chapter 7 doesn't usually help much for people who are behind on the mortgage is because chapter 7 eliminates unsecured debt, like credit cards and medical bills. It doesn't elimiate debt that is secured, meaning debt that is backed up by collateral- in this case, your house. The bank's lien on the house stays put in bankruptcy.

If you are behind on the mortgage and want to keep your house, a strategy session with a bankruptcy lawyer is in order. We will first look at whether or not saving the house makes good financial sense, and if it is feasible for you. If so, you may wish to consider a chapter 13 bankruptcy. Chapter 13 would allow you to pay back what you fell behind on, over a period of 3- 5 years. It stops a foreclosure dead in its tracks. That being said, chapter 13 is not for everyone. I strongly encourage you to give our office a call if you live in the Chicagoland area and are considering your options when it comes to keeping your house. We can be reached at 630 250-8813 for a free, confidential and no-pressure consultation. 

Carol O'Connor Cadiz
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Attorney & Owner at O'Connor Cadiz Law: Injury & Accidents, Disability Insurance.