How Long Can I Stay in My House When Filing a Chapter 7?

As you contemplate filing a Chapter 7 bankruptcy case you may wonder how long you will be able to stay in your home after you file a petition for bankruptcy. There are a number of factors that come into play in regard to maintaining your residence after filing for bankruptcy protection under Chapter 7.

Function

The function of a Chapter 7 bankruptcy is to allow you to liquidate or "get out from under" your debts. Most of your debts will be discharged and you no longer will be responsible for them. This contrasts with a Chapter 13 bankruptcy through which a master payment plan is developed that allows you the ability to pay off your debts over time.

Automatic Stay

Upon filing a bankruptcy petition, an "automatic stay" takes effect. This prevents your creditors from taking further action to collect a debt from you absent specific authorization from the bankruptcy court. For example, if your home is in foreclosure, those proceedings will some to a halt for the time being. You will be able to maintain possession of your residence until the court takes further action. Although this time period varies, barring any affirmative action on your part, the automatic stay remains in effect as to your home for 60 to 120 days in most cases.

Secured Debt

Even in a Chapter 7 proceeding you have the ability to pay off certain debts even if that is not the primary purpose of a Chapter 7 bankruptcy. You may attempt to negotiate debt that is secured by property. Normally this includes your home and car.

Reaffirmation Agreement

During the course of a bankruptcy case, you have the option of entering into a reaffirmation agreement with creditors with whom you have secured debt. For most consumers, this will be a home and a car. By entering into a reaffirmation agreement you are modifying your loan, a process that allows you the ability to pay off the debt on a new schedule and keep the property in question. By entering into a reaffirmation agreement in regard to your home, you will be able to stay in it indefinitely. The key to retaining your home is to make timely payments pursuant to the terms of the reaffirmation agreement.

Warning

A Chapter 7 bankruptcy, including negotiating a reaffirmation agreement to keep your home, is a complicated process. Therefore, you are best served by retaining the services of an experienced, qualified bankruptcy attorney to provide you representation throughout your case.

References

• United States Bankruptcy Code, Chapter 7
• Bankuptcy: An Overview
• The New Bankruptcy: Will It Work for You?; Stephen Elias; 2009