Can I Keep My House in Bankruptcy?
For individuals facing financial hardship, filing for bankruptcy can be a way to regain control of their financial situation and start anew. However, one of the most common concerns facing those considering bankruptcy is whether or not they will be able to keep their house. The answer, as is often the case with legal matters, is: it depends.
While bankruptcy does provide a fresh start, it is not an automatic guarantee that you will be able to keep your house. The outcome largely depends on the type of bankruptcy you file and the equity you have in your property. Let’s explore the different bankruptcy options and their impact on your home:
Chapter 7 Bankruptcy:
This type of bankruptcy involves the liquidation of your assets to pay off your debts. While it may sound intimidating, most states provide certain exemptions that can protect your home equity up to a certain amount. **If your equity falls within the exemption limit set by your state, you can keep your house in a Chapter 7 bankruptcy**. However, if you have significant equity and cannot exempt the full amount, the bankruptcy trustee may sell the property to pay off your debts.
Chapter 13 Bankruptcy:
Unlike Chapter 7, Chapter 13 bankruptcy allows individuals to keep their property while creating a repayment plan to satisfy their debts over a period of three to five years. This favorable option is ideal for homeowners facing foreclosure, as it can provide an opportunity to catch up on missed mortgage payments. **You can definitely keep your house in a Chapter 13 bankruptcy**, as long as you continue making mortgage payments under the court-approved repayment plan.
Related FAQs:
1. Can I keep my house if I file for bankruptcy?
It depends on the type of bankruptcy you file, the equity in your home, and state exemption limits.
2. How much equity can I keep in Chapter 7 bankruptcy?
The exemption limit varies by state and can range from a few thousand dollars to several hundred thousand dollars.
3. Can I keep my home if I’m behind on mortgage payments?
Filing for Chapter 13 bankruptcy can provide an opportunity to catch up on missed payments and potentially save your home from foreclosure.
4. Can I keep my home if it’s worth more than my mortgage balance?
If your home’s market value exceeds your mortgage balance, your equity may be at risk in a Chapter 7 bankruptcy. However, in Chapter 13 bankruptcy, you can retain your home by repaying your debts through a court-approved plan.
5. What happens to my home if I don’t claim an exemption in Chapter 7 bankruptcy?
If you fail to claim an exemption for your home’s equity, the bankruptcy trustee may sell it to repay your debts.
6. Can I keep my home if I file bankruptcy jointly with my spouse?
Yes, you and your spouse can both file for bankruptcy jointly and potentially keep your home.
7. Can I sell my home while in bankruptcy?
In Chapter 7 bankruptcy, the bankruptcy trustee may sell your home. In Chapter 13, you generally need court approval to sell your home.
8. Can I keep my home if it’s the only asset I have?
Generally, yes. If your home is your primary residence and falls within the exemption limit, you can likely keep it in bankruptcy.
9. What if I have a second mortgage or home equity loan?
While a Chapter 7 bankruptcy may eliminate your personal liability for these loans, it does not automatically eliminate the liens. In Chapter 13, you may have the opportunity to remove or “strip” certain types of liens.
10. Can I keep my investment property in bankruptcy?
The rules surrounding keeping an investment property in bankruptcy are different from those for your primary residence. It’s advisable to consult with a bankruptcy attorney to discuss your options.
11. Can I keep my home if it’s in foreclosure?
Filing for bankruptcy, particularly Chapter 13, can provide an opportunity to stop foreclosure proceedings and keep your home.
12. Can I keep my home if it’s financed through a lease-to-own or land contract?
In Chapter 7 bankruptcy, the trustee may seize the property, as it is generally considered an asset. However, in Chapter 13, you have more flexibility to keep the property and continue making payments.