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It depends. In a Chapter 7 case, while you will lose assets but get rid of debts, you can either formally reaffirm the mortgage loan or, in some judicial districts, just keep making payments. If you fall behind on payments, and have some equity in your home, Chapter 13 bankruptcy may be a better choice for you because it allows you to pay off the arrearages (mortgage) over time and therefore face less risk to losing your home to the trustee. A critical consideration in a Chapter 13 case is whether a debtor whose home loan is in default can make the larger mortgage payments (the missed payments plus resuming the original payments) over the repayment period. Click "home foreclosures" for more information on this subject. Finally, if your home equity is larger than the state's homestead exemption, Chapter 7 is not the choice since you would probably lose your home.

(Reviewed 11.14.08)