According to Vernon Hills bankruptcy attorney, if you are filing for Chapter 7 bankruptcy and there is not significant equity in the house, then you can keep your house. Of course, this is provided that you continue to make your post-petition mortgage payments after the case is filed. If, on the other hand you do not wish to keep your house, then you can simply stop making your post-petition mortgage payments and let the house go through your foreclosure process. You will not be held personally responsible for any underlying debt after you file for Chapter 7 on your mortgage. Your mortgage company still has to go through the lengthy foreclosure procedure before the title of the property can be transferred from your dated to their name.
In most Chapter 7 bankruptcy cases, clients continue to make their regular first and/or second mortgage payments in an effort to keep their house. In the event that they cannot do this, then any time after the bankruptcy case is filed, provided they have not signed a reaffirmation agreement, clients are protected by which they can surrender the property, stop making the payments and start to save money to eventually move on.
If you do a Chapter 7 and you find you cannot make your mortgage payment going forward, then you do have the ability to try and reorganize the mortgage arrearage portion under a Chapter 13 bankruptcy case. This is sometimes known as a Chapter 20 case where someone files a Chapter 7 first and then they switch to a Chapter 13 somewhere down the road. Consult your attorney with regard to filing a bankruptcy after you have decided not to keep your house or if you have decided to keep your house and you simply don’t have the ability to pay for it directly.