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Can you keep two houses if you file for Chapter 13 Bankruptcy?

Like so many questions in bankruptcy, the answer is:  It depends.

When most people file a Chapter 13 bankruptcy they are generally doing so to either save a house from foreclosure, or because the person is an “over means” debtor which requires them to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy.

When you file a Chapter 13 bankruptcy your creditors cannot get less toward what they are owed than if your non-exempt assets were liquidated in a Chapter 7 bankruptcy.   Generally speaking, a second house is going to be a non- exempt asset.

As a result, when a Chapter 13 bankruptcy is filed it is necessary that a Chapter 7 liquidation analysis be performed.

So how does this affect whether you can keep two houses in a Chapter 13 bankruptcy?

The answer is that if keeping the second house will mean that you are paying an  unsecured creditor less than they would have received in a Chapter 7 bankruptcy if the second house was sold (liquidated), then the bankruptcy trustee is likely to either sell the second house, or the trustee will require you to pay an additional amount to the unsecured creditors to account for the liquidation value of the second house.

If you are considering filing for bankruptcy and are dealing with multiple pieces of real estate, you should consult with an experienced bankruptcy attorney to determine the right bankruptcy for you.

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