If I am buying a home on contract for deed, will I lose the home in my chapter 7 bankruptcy?

By: Megan M.R. McCarthy

Short answer: if you keep making your payments you can stay in the home and the contract will continue on, unaffected by the bankruptcy. If you stop making payments, the contract will likely be cancelled, the property will go back to the seller and you will lose any equity you had built up in the property.

If you are making payments on a home through a contract for deed and file a chapter 7 bankruptcy, chances are you will have no issues staying in the home. If you fall behind on payments, however, the seller still has the right to cancel the contract and take back the home. Unlike a traditional mortgage, however, if the contract is cancelled and the home returned to the seller, the seller will not have the authority to come after you for any balance owed on the contract for deed.

If you are behind on payments prior to starting your bankruptcy and have already been provided a notice of cancellation (typically a 60-day notice), you will want to catch up on the payments in order to stop the cancellation and stay in the home following the bankruptcy.

Because every contract for deed is different, you should sit down and consult with a bankruptcy attorney to determine the specifics of your contract and asses your options.

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