When facing financial difficulties, individuals may consider filing for bankruptcy as a way to alleviate their debt burden. However, one common concern is what happens to their house if they choose to file for bankruptcy. In this article, we will explore the implications of filing for bankruptcy on a person’s house and the different scenarios that may arise.
Chapter 7 Bankruptcy and Your House
Chapter 7 bankruptcy is a type of bankruptcy that involves the liquidation of assets to pay off debts. When filing for Chapter 7 bankruptcy, your non-exempt assets are typically sold to repay your creditors. However, the laws regarding exempt assets, including your house, vary from state to state.
In some states, you may be able to keep your house if it falls within the exempt assets category. This means that the value of your house is protected up to a certain limit specified by state law. If the equity in your house is below this limit, you may be able to retain ownership of your home.
On the other hand, if the equity in your house exceeds the exempt limit, the bankruptcy trustee may sell your home to repay your creditors. In such cases, you may be given a certain amount of time to find alternative housing before the sale takes place.
Chapter 13 Bankruptcy and Your House
Chapter 13 bankruptcy, also known as a wage earner’s plan, allows individuals with a regular income to create a repayment plan to pay off their debts over a period of three to five years. Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy does not involve the liquidation of assets.
Under Chapter 13 bankruptcy, you can keep your house as long as you continue to make mortgage payments and fulfill the terms of your repayment plan. This type of bankruptcy is often a good option for homeowners who want to protect their homes from foreclosure while repaying their debts.
Foreclosure and Bankruptcy
If you are already facing foreclosure proceedings on your house, filing for bankruptcy can provide temporary relief through an automatic stay. An automatic stay halts all collection efforts, including foreclosure, giving you time to reorganize your finances and potentially save your home.
However, it’s important to note that bankruptcy only provides temporary relief from foreclosure. If you are unable to catch up on your mortgage payments or negotiate a loan modification, the foreclosure process may resume once the bankruptcy proceedings are complete.
Consulting with a Bankruptcy Attorney
Navigating the complexities of bankruptcy and its impact on your house can be challenging. It is highly recommended to consult with a qualified bankruptcy attorney who can provide personalized advice based on your specific situation. They can help you understand the exemptions available in your state, guide you through the bankruptcy process, and explore alternatives to foreclosure.
Filing for bankruptcy can have different implications for your house depending on the type of bankruptcy you file and the equity in your home. In Chapter 7 bankruptcy, the equity in your house may determine whether you can keep it or if it will be sold to repay your creditors. In Chapter 13 bankruptcy, you can usually keep your house as long as you continue to make mortgage payments and fulfill the terms of your repayment plan. If you are facing foreclosure, filing for bankruptcy can provide temporary relief, but it’s important to address the underlying issues to avoid losing your home in the long run.
– FindLaw: www.findlaw.com/bankruptcy.html
– United States Courts: www.uscourts.gov/services-forms/bankruptcy