How to Keep Your House & Equity in a Chapter 7 Bankruptcy
- 1). Obtain a petition form and companion documentation from the clerk of the bankruptcy court, including schedules. Bankruptcy court clerks typically maintain the primary forms necessary to pursue a case for debtors not represented by counsel. Also, the U.S. Bankruptcy Court main web site maintains a section to download forms.
- 2). List your home as exempt property on the bankruptcy petition. Exemptions are governed by state rather than federal law. The extent of the homestead exemption varies from one state to another. The guidelines for completing the bankruptcy petition include basic information about the extent of the homestead exemption in your state.
- 3). Complete all schedules associated with the Chapter 7 bankruptcy petition. On the exemption schedule, be certain to include your home as you did on the petition.
- 4). Contact your home mortgage lender. Explain that you wish to enter into what is called a reaffirmation agreement. A reaffirmation agreement is a contract through which you reaffirm your home mortgage loan, will maintain possession of the premises and will continue to make loan payments into the future to satisfy the obligation.
- 5). Attend the creditors' meeting scheduled in your case. The creditors' meeting is the session in which the bankruptcy trustee questions you about your case and reviews items, including a proposed reaffirmation agreement. Creditors are permitted to attend the meeting if they desire (hence, the name of the session). Provided no creditor has a bona fide objection and assuming the bankruptcy trustee approved of the reaffirmation agreement, you will be able to keep your home and any accumulated equity in the premises.