Posted on: 26 April 2023
It's only natural for those considering a bankruptcy filing to worry about their home. However, many homeowners file for Chapter 7 without ever encountering a problem. The way your home fairs with a Chapter 7 filing depends on several factors. Read on and find out more so you will be ready to make an informed decision.
Your Home Is an Asset
While you might already think of your home as an asset, after filing for bankruptcy it may also be a bankruptcy asset. When you file for Chapter 7 bankruptcy, your home will be subject to the bankruptcy estate. This means that the bankruptcy trustee will review your assets and liabilities to determine if any of your property, including your home, can be sold to pay off your debts.
Keep Your Home
You can keep your home in many cases based on the below factors:
Homestead exemption: Depending on your state of residence, you may be able to claim a homestead exemption to protect some or all of the equity in your home from creditors. Homestead exemptions vary greatly from state to state. For example, in one state you may be able to exempt your home at its full value. In other states, filers can exempt several thousands of dollars from the value of the home. It's worth noting that states offer filers exemptions on not only their primary residence but also on things like vehicles, personal possessions, and more.
Mortgage payments: If you are current on your mortgage payments, you may be able to reaffirm your mortgage debt, which means that you agree to continue making payments on your mortgage in exchange for keeping your home. However, many filers are behind on their mortgage when they file for bankruptcy. While declaring bankruptcy will stop foreclosure actions, the stay will be lifted eventually. It's advisable to work with your mortgage lender and get caught up on your payments to keep your home.
Equity in the home: If the equity in your home is less than the available exemption, the trustee will not sell your home to pay off your debts. This is also the case with vehicles with auto loans attached.
It is important to consult with a qualified bankruptcy attorney to understand your options and the protections available to you under Chapter 7 bankruptcy. The laws and exemptions surrounding bankruptcy vary from state to state, so be sure to work with an attorney who is familiar with the laws in your state. Speak to a Chapter 7 bankruptcy attorney in your area today to learn more.Share