Is it acceptable to buy another house and stop paying the mortgage on your current home allowing it to go into foreclosure?

UPDATED: Aug 2, 2011

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Is it acceptable to buy another house and stop paying the mortgage on your current home allowing it to go into foreclosure?

We are upside down on our house and if we choose to buy a different house and we stop paying on the current house we are in, will that be covered under the Chapter 7 relinquishing the debt or are we still liable to pay the mortgage. We are not having trouble making our mortgage payment, but at some point we would like to move, but at this point we are so upside down on our house that it will be impossible to get what we owe on the house when we sell.

Asked on August 2, 2011 Minnesota


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

You need to consult with a bankruptcy attorney before doing anything.

First, if you file for Chapter 7 while owning a home with a mortgage, you will have the choice of either reaffirming the debt--agreeing to keep paying it, notwithstanding the bankruptcy--in which case you keep the home; or you let the bank take the home and you will not owe anything on the remaining balance.

However, sometimes, if you engage in a large transaction (including one in which you are incurring new debt) to your benefit shortly before filing bankruptcy, that will be considered a fraud on the bankruptcy court creditors, and either the filing as whole or that transaction itself may in some way be disallowed; i.e. buying a new home, reaffirming that while discharging the debt on the old one, may be seen as an abusive practice. You need legal advice to help you determine what you can and can't safely do before you commit to a course of action.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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