One of the debtor’s major concerns in a consumer bankruptcy is the thought of losing the family home. Although that is possible in some cases, loss of the debtor’s home need not always happen in a bankruptcy filing.

If the debtor in a Chapter 7 liquidation bankruptcy is behind on his or her mortgage payments, the home could be lost. The mortgage lender in such cases usually asks the bankruptcy court to lift the automatic stay so that it can institute foreclosure proceedings in which case the home will be sold and the proceeds used to pay off the debt. Whether a debtor who is not behind on mortgage payments will lose his or her house depends on how much equity the debtor has in the property and the amount of the state homestead exemption. If the amount of debt owed on the home is less than the home’s market value, the debtor could lose the house unless the homestead exemption entitles the debtor to most of the equity.

In a Chapter 13 proceeding, however, even if the debtor is behind on mortgage payments, if the wage-earner plan includes paying back any missed mortgage payments and the mortgage is otherwise current, the debtor should not lose his or her home. If the debtor is current on his or her house payments, the home will not be lost if the debtor continues to make payments when due.

If the debtor is a renter rather than a homeowner, the law is complex and the advice of an attorney important. Under most circumstances if the landlord wins the right to evict the debtor-tenant before the bankruptcy is filed, the automatic stay will not stop the eviction proceedings. An eviction may also survive the automatic stay if the tenant is endangering the property or using illegal substances on the premises. However, these provisions may apply differently to those with public-housing leases.

Usually a residential lease can be assumed in bankruptcy and the debtor-tenant can continue to live there and pay rent according to the lease terms, but certain deadlines may have to be met for the lease not to be considered rejected.

If you are in danger of losing your house, call Harold Faletti Law Office at 720-863-4426 or contact us online today.  Harold Faletti has been helping people eliminate debt in north Denver since 1982. Let him help you too.