Is bankruptcy a good idea if I own my home outright?
Many people work hard for years to pay off their homes. When you paid yours off at long last, you must have felt incredibly proud. Whether your mortgage lasted for 15 years, 30 years or another length, it was too long. You must have often felt like no end was in sight.
However, you have since run into financial trouble, perhaps due to credit card bills, scammers, medical bills or something else. Bankruptcy is one potential way that you could help yourself, but would you lose the home you worked so hard for?
Each situation is different
Before answering in generalities, it is important to note that each situation is different. Even if you have a friend who was able to keep (or lose) a home in bankruptcy and whose background is similar to yours, your outcome could be quite different. A lawyer can help clarify a lot of the nuances and may be able to tell you whether your odds of getting a bankruptcy petition approved while keeping your house are high or low.
A lawyer may also be able to help you navigate through debt negotiation or debt consolidation. You might not need bankruptcy after all!
You do have choices
Even in bankruptcy, you have choices. For instance, you may be understandably attached to the house, but if selling it and downsizing to a less expensive residence would help you avoid bankruptcy or would enable you to get out of bankruptcy smoothly, then that might be the best possible outcome. The idea is that if you have equity in your home, you should leverage that to pay off creditors.
If you want to keep your house no matter what, it may be possible to take out loans and use the proceeds from them to pay off the creditors coming after you. Do be warned that if you take out these loans and still struggle with debt, you could end up losing the house and be in worse debt than before.
In a Chapter 13 bankruptcy, your assets are not liquidated. Thus, keeping your house should be doable as long as you qualify for this type of bankruptcy. Your income would need to be above the state median income for your household size for you to qualify.