I have to file bankruptcy for my business(S corp & 2 LLC's) which we've owned for 6 years because the bank is going to default our loans because we are behind on our property taxes and personally to protect my self. Should I/can I buy a house before my credit is ruined? If I do, will I lose the house even if I can make the payments? Is there any way to not include the house in the bankruptcy?
Chapter 7 Bankruptcy Attorney
Usually by the time you have enough debt to make filing bankruptcy worthwhile, your credit is already ruined. However, if you can obtain financing to purchase a home, in most instances you can keep the home as long as you can afford to make the payments on it. I would certainly meet with an attorney to discuss planning your bankruptcy before you sign to purchase property. Hope this perspective helps!
Family Law Attorney
Any new debt you take out immediately prior to a bankruptcy will be highly suspect, and, depending on the trustee, could be voided as fraudulent (for example, you take on secured debt to make the Chap. 7 cap work). The question the trustee is going to ask is this - if you already had a place to live, and you can "afford" the purchase of a new home, how is it that that extra monthly income wasn't used to repay creditors? And, no, you can't avoid listing the house/mortgage in the bankruptcy - it will be included, and these issues are going to come up. One of the standard questions a trustee asks if, "Have you given anyone a new security interest in property within the past few years?" You'll have to respond, "Yes." That's when it will get complicated.
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If you can qualify for a new mortgage, I'd be curious as to why you're inclined to file for Bankruptcy... If you're qualified for a new mortgage and capable of paying for it.
The technical answer is "yes," you can probably buy a house (assuming you can afford to pay for it and reaffirm). At this point, however, I wouldn't recommend buying a house immediately before filing for a bankruptcy. You will probably, in the future, be eligible for a mortgage on another home.
Bankruptcy is all about wiping out debts and the privilege of a fresh start. It's a lot harder to actually earn that fresh start if you've already signed up for more debt before the bankruptcy is even over with. Give it some serious thought before making a decision.
Good luck with your case!
5 lawyers agree
Chapter 7 Bankruptcy Attorney
Just to add on the advise the other attorneys gave you, all assets and liability must be included in your petition. There is no way to keep the mortgage loan and the house out of the bankruptcy, but that does not mean you cannot retain the home as long as you make the payments. And again, meet with an attorney to discuss this situation.