If you are not a homeowner, imagine for a moment that you are. It comes time to deal with your mortgage payments, but you have recently hit hard financial times and you fear that you will not be able to pay. What should you do? Should you file for bankruptcy? And how does your decision affect your property?

Filing for Chapter 7 bankruptcy means that your assets will be liquidated to repay creditors and clear unpaid debt. Homes can be made exempt from the liquidation process, along with other major items such as your car. This is not a guarantee, but it is possible to salvage your home when filing for Chapter 7.

However, let's say you file for Chapter 7 bankruptcy when the equity of your home surpasses your financial capacity to take care of it. In this case, the court-appointed trustee that looks over your bankruptcy filing will discover your inability to cover the expense and put your home up for liquidation.

Another way to use Chapter 7 is to utilize the bankruptcy filing as a time-borrowing method. Imagine a new scenario: your home is entering foreclosure. What can you do to try and salvage your predicament?

When the foreclosure sale approaches, you could apply for bankruptcy. This will temporarily halt your home's foreclosure and give you an opportunity to either apply for a loan modification or to fix any issues with your home that could hurt its value during foreclosure. But, to reiterate - this is a temporary fix and there are no guarantees that it will save your home.

It is best to discuss things with a bankruptcy lawyer before filing for Chapter 7. Your attorney can answer your questions about the bankruptcy process and let you know whether your home will be in jeopardy if you proceed with a Chapter 7 filing.

Source: FOX Business, "Can Bankruptcy Cause Me to Lose My Homes?," Justin Harelik, Feb. 7, 2012