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Minnesotans can own a home and file for Chapter 7 bankruptcy


Experienced bankruptcy professionals can analyze your unique case, helping you make the right decisions that enable you to start fresh after a filing.


In a recent article published by Bankrate.com, the financial website's bankruptcy advisors answered a question submitted by a reader identified as Gil.

Gil asked the source a common question that many Minnesota residents could benefit from knowing the answer to: Is it possible to own a home and file for Chapter 7 bankruptcy?

According to Bankrate, the many financially struggling Americans who own a home can still seek protection through a Chapter 7 filing. The reason this misconception exists is that in this type of bankruptcy, your unprotected assets can be liquidated as a way to repay creditors. The key, the source says, to determining whether you can protect your home is the amount of equity in your home.

“Equity is important in bankruptcy filings because it shows the courts whether there is money available somewhere to pay off your debts – in this case, your home,” the report said.

Your home is an asset and the value must be disclosed to the court. However, the amount of equity is determined by subtracting the balance of the mortgage(s) against the home from the market value of the home. In Minnesota, you can protect up to $360,000 of equity in your home. This means that if your home is worth $400,000 and you have a $50,000 balance remaining on your mortgage, you can file for Chapter 7 bankruptcy protection and keep your home.

Many Minnesotans find themselves in a position with much less equity, and in many cases the balance of the mortgage(s) exceeds the value of the home. In those cases, underwater homes are all protected in Chapter 7 and the homeowners can continue to keep their homes.

Additionally, bankruptcy can help people keep their homes. There are situations in which a Chapter 13 filing, if you're able to meet the terms this type of bankruptcy requires, can be beneficial. For example, in a Chapter 13 filing, if you file your case prior to the foreclosure sale, you can bring your mortgage arrears current over the course of your three-to-five-year Chapter 13 plan. In addition, you can discharge your credit card, medical and other unsecured debts by paying pennies on the dollar.

But, while this answer provides usable information for anyone considering a protective filing, even Bankrate says that those who are struggling financially and want to keep their home may benefit from speaking directly to a foreclosure attorney about bankruptcy. Experienced bankruptcy professionals can analyze your unique case, helping you make the right decisions that enable you to start fresh after a filing.

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