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Bankruptcy Alphabet: H is for House

By Cathy Moran

In my bankruptcy alphabet, H is for house.

Can I keep my house if I file bankruptcy, anxious homeowners ask.

With the precipitous fall of home values, my answer is almost always, “yes”.

Should you keep the house is another question.

Houses are vulnerable in bankruptcy only if there is

  • significant equity
  • above the total of the mortgage payoffs and delinquent property taxes, and
  • above the homestead exemption allowable to the debtor, and
  • above the expenses of sale like real estate commissions

If the trustee can’t sell the property for enough money to pay  costs of sale, property taxes, mortgages and their arrears, and the debtor’s homestead, the house will be abandoned by the trustee back to the debtor.

It’s black letter law that liens pass through bankruptcy unaltered, unless there is a bankruptcy court order to the contrary.   The liens of the mortgage lenders and any back property taxes remain valid charges on the property.

Even though the bankruptcy discharge prevents the lender from suing the borrower, the lender can still foreclose on the property if state law allows.

The more difficult question, then, is whether the homeowner, now free of the old unsecured debt, can work it out with the lender.  The bankruptcy case neither compels nor frustrates the attempt to modify a mortgage loan.

My questions are can the homeowner

  • Make the regular payments
  • Catch up on any missed payments
  • Modify the loan to better terms

My hope for my clients is that they can look at homeownership with a clear head, and make a sound, economic decision about whether to keep an troubled piece of property.  In the end, home is where the heart is not where your name is on the title.

This post was brought to you by the letter H. Others taking the bankruptcy alphabet challenge think H is for Household.

I think our image is courtesy of Rootytootoot.

 

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Filed Under: ABC's of bankruptcy

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Trackbacks

  1. Bankruptcy A to Z ? E is for Equity | Marin Bankruptcy Law says:
    November 15, 2011 at 3:34 pm

    […] is something we don?t see much these days in our homes. It is the value of your house, or other property, after deducting the loans and encumbrances on […]

  2. Bankruptcy Alphabet: H Is For Household says:
    November 17, 2011 at 1:37 pm

    […] Cathy Moran claims H Is For House […]

  3. Bankruptcy A to Z – H is for Home Owner’s Association Dues | Marin Bankruptcy Law says:
    November 27, 2011 at 3:52 pm

    […] Silicon Valley attorney Cathy Moran ? H is for House […]

  4. H is for House and How to Keep it in Bankruptcy | Bankruptcy Blog from Los Angeles Attorney says:
    December 1, 2011 at 11:22 pm

    […] Cathy Moran agrees that H is for House […]

  5. H is for Household Size | BankruptcyHI.com says:
    December 14, 2011 at 8:08 pm

    […] other H bankruptcy terms: Household – New York Bankruptcy Lawyer, Jay S. Fleischman House – Northern California Bankruptcy Lawyer, Cathy Moran House – Los Angeles Bankruptcy Lawyer, Mark J. Markus Hearing – Omaha and Lincoln, […]

  6. Bankruptcy Alphabet From A – Z — JC Law Group says:
    December 15, 2011 at 9:42 am

    […] Homestead House House Household Household […]

  7. Honesty in Bankruptcy Case says:
    December 16, 2011 at 11:03 am

    […] California Bankruptcy Lawyer, Cathy Moran says H is for House, no not the […]

  8. Bankruptcy A-Z: H is for Household | Metro Richmond Consumer … | says:
    December 27, 2011 at 8:21 am

    […] Hearing. H is for Homeowner’s Association Dues. H is for Household or Household Size. H is for House or House. H is for Homestead. H is for Honesty or Honesty (and Fraud Avoidance). H is for […]

  9. H is for Hardship Discharge in the Bankruptcy Alphabet - says:
    January 3, 2012 at 2:26 pm

    […] House by Cathy Moran (Northern CA) […]

  10. Walk Away From Bad Loan And Your Kids Thrive says:
    February 21, 2012 at 10:13 pm

    […] H is for House […]

  11. Bankruptcy A to Z – E is for Equity | Marin Bankruptcy Lawyer says:
    February 23, 2012 at 12:34 am

    […] think your home would sell for $450,000 based on the recent sales in the neighborhood for similar houses. You have a first mortgage of $350,000 and a second of $125,000. You got the second to perform […]

  12. Is Keeping Your Stuff The Point Of Bankruptcy? says:
    July 19, 2012 at 7:35 am

    […] bankruptcy is a chance to evaluate what’s really important and what’s possible.  Sometimes, stepping back tells you the house is worth struggling […]

  13. Bankruptcy Alphabet: H is for Holding Property for Another | | Stokley Martin Law Group, LLC says:
    November 25, 2012 at 1:32 pm

    […] Association Dues Homestead Honest but Unfortunate Debtor Honesty Honesty (and Fraud Avoidance) House Household Household Household Median Income Household Size How Much is Your Home Worth? Save My […]

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You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

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