Keeping your home after Chapter 7 Bankruptcy
With the current trend in our economy many people are finding themselves in financially tough times and are left with drastic choices to help fix their situation, like Chapter 7 bankruptcy. Many folks are filing for chapter 7 Bankruptcy to get away from owing money on a property that has negative equity or they simply can’t afford the payments and need to hit the reset button on their finances.
If your intention is to keep your home than before even considering Chapter 7 it may be in your best interest to attempt to negotiate new terms directly with your lender. Lenders sometimes find it is in their best interest to come up with a workout plan that will benefit you and them as opposed to having you file for bankruptcy. The lender may agree to renegotiate payments terms by modifying the loan or refinancing.
Can I keep my home?
If you are current on your mortgage and don’t have a lot of equity then most likely yes you may keep your home.
What if I have a lot of equity in my home?
The trustee may force you to sell your home to get money to pay back your creditors. A major exemption that you really need to find out the qualifications in your state is the Homestead exemption.
How can the Homestead Exemption help?
The Homestead Exemption allows a portion of your equity (up to $175,000), acres of land (up to 200) or property taxes to be protected from creditors. The trustee will calculate whether or not it makes sense to sell your house and use the funds to pay to some or all of your creditors. Each state has there own guidelines of what you may qualify for. Click here to find out what is available in your state.
Will a chapter 7 stop the bank from selling my home temporarily?
While your bankruptcy is active all of your creditors including your mortgage are forced to stop collection activities, including selling your home. This is called an “Automatic Stay”. Keep in mind the lender can ask the court to remove the automatic stay before your bankruptcy is finished and if they are successful they can continue with the foreclosure process. Filing for Chapter 7 should stall the foreclosure process for at least 2 – 3 months.
What if I don’t have equity in my home?
The trustee may find that after eliminating your unsecured debt you now have enough extra money to pay your monthly mortgages payment. If that is the case then yes you may keep your home if you want to.
For the most accurate understanding of whether Chapter 7 bankruptcy is in your best interest click here (directory) to contact an attorney in your area.
Other resources: uscourts.gov – Chapter 7 government details
Wikipedia – Homestead exemption