Should I try to keep my home when I file bankruptcy?



By:Mike Cibik

Filing bankruptcy, of course, is a personal financial strategy that should help you and your family eliminate or restructure debt and move forward with a liveable household budget.

Many bankruptcy filers own a home and usually they want to do everything possible to keep that home. In Chapter 7, this often means signing a reaffirmation agreement(provided you are current on your mortgage payments), and in Chapter 13 this can mean curing a delinquency (arrearage) in mortgage payments over a five year plan.

Obviously it makes less sense to keep a home if prices are falling and if neighborhoods consist of renters rather than owners.

If you are a homeowner who is contemplating bankruptcy, I strongly urge you to spend some time learning more about your local real estate market. Has the “recovery” of housing prices been driven by individuals buying homes for their own use, or has it been driven by investment funds buying homes as investment. If the latter, don’t be surprised if we see yet another crash in home prices as these funds look to cash out and salvage their investments.

As much as your initial reaction may be to keep your home, doing so may not make sense because of market forces you cannot control. Bankruptcy allows you to walk away with little or no penalty and sometimes that is the best course of action.


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