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Can the bank take your home after bankruptcy?

An interesting question was posed to the bankruptcy adviser at ABC News this month that we figured many of our readers might also be asking. The question asks whether a bank can foreclose on a home well after a bankruptcy filing has been settled. Unfortunately for the man who asked the question, the answer may not have been quite what he expected.

Because the man filed for Chapter 7 bankruptcy, he was bound to the rules of what debt can be discharged and what debt cannot. According to Chapter 7 bankruptcy law, only a portion of the home's equity can be considered exempt when filing, meaning not all of the debt associated with the home can be discharged during bankruptcy.

Some people may get the false impression that they get to keep their home during a bankruptcy if the bank does not follow through with foreclosure proceedings during the time that the case was being decided. But once a debtor files for bankruptcy, the court will issue an automatic stay. This prevents the seizure of a debtor's property, such as a house, while the case is being settled. Unfortunately, after this time, a bank can resume the foreclosure process, leaving a homeowner rather confused and unsure about what to do next.

While some people may think that hiring a lawyer during the bankruptcy process is an unnecessary expense, having access to legal expertise during bankruptcy litigation can actually be incredibly helpful in the end. A lawyer can not only answer any questions you may have about the process but they can guide you towards making the best decisions for your particular situation.

Source:  ABC News, "Foreclosure on Property After Bankruptcy?" Justin Harelik, Oct. 25, 2013

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