Can I Declare Myself Bankrupt if I Have a Mortgage?

You may have met people that say “I’m going to declare myself bankrupt” and I won’t have to pay back any of my debts including my mortgage.  There is nothing to stop you declaring yourself bankrupt if you have a mortgage.  However please note that secured debts (like mortgages and car loans) are not directly affected by declaring bankruptcy.  After you are declared bankrupt you will still need to pay your mortgage/secured loans.

Declare Myself Bankrupt and Lose my Home? 

There is no reason why you should have your house re-possessed just because you have declared yourself bankrupt.  So long as you have the income to pay your mortgage payments everything will go on as before.  You may have to sell your house to pay your share of any value above the outstanding mortgage amount into your bankruptcy (in the US there are state-by state rules regarding exemptions for your home).  If this is the case then the courts can force you to sell your house.  This can sometimes be avoided by careful planning before bankruptcy is declared, by selling your share of the house to a relative or your partner.

You should consider the bankruptcy alternatives and find as much information on bankruptcy as you can.  It is a serious step and you should not consider filing for bankruptcy without thinking through the consequences. 

If you live in the UK and share ownership of your house with a partner then a sale will not be forced until at least a year after bankruptcy is declared.  This is nor part of bankruptcy law but is the normal procedure followed by the insolvency service.

Tags: Bankruptcy, Debt Advice, mortgage debt