Type of Bankruptcy

• The type of bankruptcy that you file will have an impact on whether you keep your house. If you file for Chapter 13, you will not risk losing your house. With this type of bankruptcy, you enter into a debt repayment plan with your creditors through the court. None of your possessions are at risk of being lost. If you file for Chapter 7 bankruptcy, then you risk losing some of your property, including your home.
  
  

Exempt Property

• Even if you file for Chapter 7, you may not have to lose your home if you do not want to lose it. With Chapter 7 bankruptcy, you get to claim certain items as exempt property. The items that you get to claim differ from one state to the next, but most states have a rule that allows homeowners to claim the equity in their primary homes as exempt property. This means that you often get to keep your home.
  
  

Giving up on the House

• When you go through a Chapter 7 bankruptcy procedure, the mortgage debt that you have on your primary residence is discharged. Because of this, you could legally walk away from the debt and not be responsible for it. However, many homeowners do not wish to lose their homes and instead simply keep making the payments. If you decide that you do not want to stay in your primary residence, you may simply stop making payments and move out at this point.
  
  

Considerations

• Although you have the legal right to walk away from your house after filing for Chapter 7 bankruptcy, it does not necessarily mean that you should. Filing for bankruptcy will devastate your credit score already, but allowing your home to foreclose can make things that much worse. Creditors will be able to see that you had a bankruptcy and foreclosure. This means that it may be very difficult to obtain credit at some point in the future.