**Can you claim bankruptcy and still keep your house?**
Financial difficulties can be overwhelming, often leading individuals or families to consider bankruptcy as a way to relieve their debt burdens. One of the most critical concerns for homeowners is whether they can claim bankruptcy while still keeping their house. The answer to this question largely depends on several factors, such as the type of bankruptcy filing chosen, the amount of equity in the house, and the willingness to continue making mortgage payments. Let’s delve deeper into this topic and address some related frequently asked questions (FAQs) to provide a comprehensive understanding.
1. What are the different types of bankruptcy filings available?
Bankruptcy typically falls under two main categories: Chapter 7 and Chapter 13. Chapter 7 aims to discharge most unsecured debt, while Chapter 13 involves a repayment plan to creditors over a certain period.
2. Can I keep my house if I file for Chapter 7 bankruptcy?
If you file for Chapter 7 bankruptcy, you may be able to keep your house if you are current on your mortgage payments and the equity in your home is within the exemption limit set by your state.
3. What are homestead exemptions?
Homestead exemptions are laws that vary by state and allow individuals to protect a certain amount of equity in their primary residence from being seized during bankruptcy proceedings.
4. Are there limitations on the homestead exemption?
Yes, homestead exemptions have limits which vary by state. Some states have generous exemptions, allowing homeowners to protect a substantial amount of equity, while others impose stricter limits.
5. Can I keep my house if I choose Chapter 13 bankruptcy?
Choosing Chapter 13 bankruptcy presents more flexibility to keep your house. It involves a debt repayment plan lasting three to five years, enabling you to catch up on missed mortgage payments while keeping your home.
6. Will filing for bankruptcy stop foreclosure?
Filing for bankruptcy triggers an automatic stay, which temporarily halts the foreclosure process, giving you time to evaluate your options and potentially catch up on missed payments.
7. Can bankruptcy help eliminate a second mortgage on my house?
Under certain circumstances, bankruptcy can eliminate a second mortgage or home equity loan, particularly if the value of your house is less than what you owe on your first mortgage.
8. What if I am behind on mortgage payments?
If you are behind on mortgage payments, filing for bankruptcy may provide an opportunity to catch up through a Chapter 13 repayment plan. However, it is crucial to consult with an attorney to determine the best course of action.
9. What happens if I have a joint mortgage with someone who isn’t filing for bankruptcy?
If you have a joint mortgage with someone who isn’t filing for bankruptcy, the non-filing party remains responsible for making the mortgage payments. However, bankruptcy may protect the equity that belongs to the filing party.
10. Can I sell my house if I file for bankruptcy?
In most cases, you can sell your house during bankruptcy proceedings. However, it is essential to consult with your bankruptcy attorney and consider the implications of such a decision.
11. What if my house has more equity than the homestead exemption allows?
If your house has more equity than the homestead exemption permits, the bankruptcy trustee may sell the home, pay off the debt, and distribute any remaining funds to your creditors. However, this varies with each bankruptcy case.
12. Should I consult with a bankruptcy attorney before making a decision?
Absolutely. The bankruptcy laws can be complex and vary by state. Seeking the guidance of a bankruptcy attorney is crucial to understanding the specific rules in your jurisdiction and ensuring the most favorable outcome for your situation.
In conclusion, while it is possible to claim bankruptcy and keep your house, it largely depends on factors such as the type of bankruptcy filing, equity in the house, and ability to continue making mortgage payments. Each bankruptcy case is unique, and seeking advice from a qualified bankruptcy attorney is essential to navigate the process successfully.