How long do I have to live in my house after filing bankruptcy?

Written by S. Arteta and Fact Checked by The Law Dictionary Staff  

Under the law, there are two kinds of bankruptcy, one filed under Chapter 7 and the other under Chapter 13. In Chapter 7, the debtor is allowed by law to liquidate all his assets and deliver the proceeds thereof to his creditors. Under Chapter 13, on the other hand, the debtor shall have the right to retain some of his assets and set up a payment scheme to pay off his debts. The bankruptcy shall be terminated only when all of the debts are paid by the debtor.

Bankruptcy filed under Chapter 13 ensures the issuance of a stay order which shall have the effect of immediately stopping all collection activities against the debtor while payment arrangements are being developed.

The debtor has the option of retaining some of his assets such as his home while the bankruptcy proceeding is on going. The debtor may also choose to surrender his home to the mortgage company which must apply for the deferment of the stay order so that the latter may commence the foreclosure proceedings for the purpose of taking possession of the property. If the stay order is not lifted, the mortgage company cannot immediately take possession and control of the property and has to wait until the termination of the bankruptcy.The application for the lifting of the stay order may be commenced by the mortgage company or lender within 60 days from the day it was notified of the filing of the bankruptcy.

Upon the filing of the bankruptcy proceedings and the issuance of the stay order, the court will notify all creditors within 30 days from the date of filing. If the stay order is lifted, there is no guarantee that the debtor can remain in possession of the property. The time that he could retain possession over the property is limited to the duration of the foreclosure proceedings. Usually, a foreclosure proceeding takes 12 months within which period the debtor must surrender the property to the mortgage company.

The debtor will not be given any notice during the entire duration of the foreclosure proceeding. The most that he will be given is a notice to vacate the property after the termination of the foreclosure. In order to protect himself, the debtor must be prepared to surrender the property to the mortgage company and to set up an evacuation plan if in case a notice to vacate is served upon him. The debtor must know that upon the commencement of the foreclosure proceeding, there is a great possibility that he will be evicted from his home.

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