So long as you remain current on your mortgage the bank will not take your home. You also need to stay current with your second mortgage, and any other mortgages on your home, because a subsequent mortgage holder can bring a foreclosure against your home in the same way that your first lender can.
When you file bankruptcy an “automatic stay” automatically protects your home collection action from creditors, even if you are behind on your payments, and even if your house is already in foreclosure. The automatic stay is temporary, and under certain circumstances it may even be unavailable. It is best to talk to a professional if you have filed a previous bankruptcy, even if you did not receive a discharge.
Many people find that they are better able to afford their home after filing bankruptcy because money that was going to pay unsecured creditors is now available to make mortgage payments.
When you file for bankruptcy, if you do not “reaffirm” the mortgage, you will not be personally liable to repay the loan amount. This does not mean that you can keep your house without paying. What it does mean is that if, for any reason, you can no longer make your mortgage payments and your home is repossessed, the lender cannot sue you to for the difference between what you owe and the amount the bank receives when it is sold. For example if you owe $800,000 for your house, but the lender can only sell it $700,000, the lender could ordinarily sue you for the $100,000 shortfall. When you file bankruptcy but do not reaffirm the mortgage, the bank cannot sue you for that $100,000 shortfall. At most, the bank can take the house, as collateral for the loan, but it cannot sue you additionally.
On occasion, people will reaffirm the mortgage in bankruptcy. When you reaffirm your mortgage, it means that you accept the contract anew, as if the bankruptcy never happened. It also means that you will be liable for any shortfall if, for any reason, you are unable to continue making your mortgage payments. Sometimes it is advantageous to reaffirm if a lender sweetens the deal by offering better terms on the mortgage. Each lender has different practices and so there is no is no guarantee that your lender will make any accommodations in the loan terms as incentive to have you reaffirm.
If keeping your home is a priority to you, and if minimum payments on credit cards or medical bills are what prevent you from keeping up on your mortgage, bankruptcy may be just what you need to help you to keep your home.
