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Can You Keep Your Home During Bankruptcy? 5 Factors
websitebuilder • 30 August 2021
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For homeowners, the decision to file bankruptcy often takes on another level of anxiety. Most wonder if they can keep their primary home if they have to file for bankruptcy protection. And while no one-size-fitsall answer exists for this question, a few important factors can help determine whether or not you can keep that home. Discover five of these factors.
1. What the Amount of Equity Is The equity in your home, as with all secured assets, is the difference between what the property is worth on the market and what you owe on a mortgage. The amount of equity (or net value) in each home is unique to its circumstances and the age of the mortgage.
The equity value in the home is compared to possible bankruptcy exemptions. The federal bankruptcy code and most states provide a list of the amounts of equity in various assets that you may exempt from seizure to pay debts. For homes, the most common exemptions are homestead and wildcard exemptions. If the equity falls below these thresholds, your home is safe.
2. Which Chapter You Choose Chapter 7 and Chapter 13 bankruptcy can have different results for your property. Chapter 7, or liquidation, bankruptcy generally considers only the exemption allowances and the current status of the loan.
However, Chapter 13 does allow you to reaffirm your mortgage under more conditions. This can help many borrowers keep their family home as long as they can continue to meet their financial obligations to the lender. If retaining the house is important, some debtors even choose to forgo liquidation if they can handle the mortgage under a Chapter 13 repayment plan.
3. If You're Behind on Payments Generally, the ability to keep your house in both Chapter 7 and Chapter 13 depends on whether you're behind on payments and how much. Those who are current with their mortgage will have a much easier time clearing the hurdles to use equity exemptions, especially if they file Chapter 7.
If you choose Chapter 13, you may have more wiggle room regarding missed payments and late fees. The reason is that you can usually structure a repayment plan to include past due payments, then stretch them out over the course of the entire term (either three or five years). This may make getting up to date manageable.
4. Whether the Stay Will Hold All chapters of consumer bankruptcy come with an automatic stay that prevents creditors - including your mortgage company - from foreclosing on assets until the bankruptcy is concluded. This is one of the most important elements if you're at risk of foreclosure.
However, the automatic stay can lift early if the mortgage company can show that you have no feasible way to afford to get (and stay) current and if no equity could be distributed to other creditors. In this case, no creditors would be harmed if the house returns to the lender.
5. Whether You Should Do So Finally, consider whether or not you should fight to keep your home even if you're allowed. This is a personal decision each debtor must make, and it has both a sentimental and a practical element.
If your bankruptcy issues stem from something unrelated and you can comfortably make mortgage payments if other debt is discharged, this could be a good decision. However, if you already struggle or fail to make payments, keeping these in place limits how much relief bankruptcy provides. This could even result in another loss down the road.
Where to Learn More Clearly, the protection of your primary residence is a complex task. The best place to begin is to consult with an experienced bankruptcy attorney in your state. Georgia residents can rely on the assistance of Custer Custer & Clark LLC . We will help you understand your options and choose the path most likely to succeed. Call today to get started.
1. What the Amount of Equity Is The equity in your home, as with all secured assets, is the difference between what the property is worth on the market and what you owe on a mortgage. The amount of equity (or net value) in each home is unique to its circumstances and the age of the mortgage.
The equity value in the home is compared to possible bankruptcy exemptions. The federal bankruptcy code and most states provide a list of the amounts of equity in various assets that you may exempt from seizure to pay debts. For homes, the most common exemptions are homestead and wildcard exemptions. If the equity falls below these thresholds, your home is safe.
2. Which Chapter You Choose Chapter 7 and Chapter 13 bankruptcy can have different results for your property. Chapter 7, or liquidation, bankruptcy generally considers only the exemption allowances and the current status of the loan.
However, Chapter 13 does allow you to reaffirm your mortgage under more conditions. This can help many borrowers keep their family home as long as they can continue to meet their financial obligations to the lender. If retaining the house is important, some debtors even choose to forgo liquidation if they can handle the mortgage under a Chapter 13 repayment plan.
3. If You're Behind on Payments Generally, the ability to keep your house in both Chapter 7 and Chapter 13 depends on whether you're behind on payments and how much. Those who are current with their mortgage will have a much easier time clearing the hurdles to use equity exemptions, especially if they file Chapter 7.
If you choose Chapter 13, you may have more wiggle room regarding missed payments and late fees. The reason is that you can usually structure a repayment plan to include past due payments, then stretch them out over the course of the entire term (either three or five years). This may make getting up to date manageable.
4. Whether the Stay Will Hold All chapters of consumer bankruptcy come with an automatic stay that prevents creditors - including your mortgage company - from foreclosing on assets until the bankruptcy is concluded. This is one of the most important elements if you're at risk of foreclosure.
However, the automatic stay can lift early if the mortgage company can show that you have no feasible way to afford to get (and stay) current and if no equity could be distributed to other creditors. In this case, no creditors would be harmed if the house returns to the lender.
5. Whether You Should Do So Finally, consider whether or not you should fight to keep your home even if you're allowed. This is a personal decision each debtor must make, and it has both a sentimental and a practical element.
If your bankruptcy issues stem from something unrelated and you can comfortably make mortgage payments if other debt is discharged, this could be a good decision. However, if you already struggle or fail to make payments, keeping these in place limits how much relief bankruptcy provides. This could even result in another loss down the road.
Where to Learn More Clearly, the protection of your primary residence is a complex task. The best place to begin is to consult with an experienced bankruptcy attorney in your state. Georgia residents can rely on the assistance of Custer Custer & Clark LLC . We will help you understand your options and choose the path most likely to succeed. Call today to get started.
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