Factors Influencing Your Family Home During Bankruptcy
It's the worst fear of many Chapter 7 filers but it doesn't necessarily need to happen to you. Your home, along with other personal assets, can be subject to seizure if it cannot be protected. However, it almost always is protected. Read on to find out more.
Assets May be Vulnerable
While Chapter 7 bankruptcy provides the most complete discharge of debts many will ever experience, it has its drawbacks. For some filers with a lot of assets, the bankruptcy trustee has the power to take an asset, sell it, and use the proceeds to pay bankruptcy administration costs or high priority creditors. That is why Chapter 7 is sometimes known as the liquidation filing.
How Bankruptcy Exemptions Can Help
Each state offers chapter 7 filers exemptions. These exemptions might cover everything from heirloom jewelry and work tools to a vehicle and a primary residence. When it comes to the family home, homestead exemptions apply. In some states, the home is exempted in its entirety. In other states, the filer can use a dollar amount to reduce the home's value.
Don't Forget About Your Loan Balance
Filers, if they owe money on their home, should take the loan balance and deduct it from the home's appraised value. Then, deduct the exemption to determine how much interest the bankruptcy court will take in the home. In some states, filers can use a wildcard exemption for anything they like and that can also be applied to the reduction in value. If you are filing jointly with a married partner, you may be able to double your homestead exemption. If your home still exceeds the value of the exemption, it may still be safe in some situations. Speak to a bankruptcy lawyer to find out more.
Filers, if they want to keep their homes, must stay up to date on their mortgage payments or they could lose it no matter how valuable the exemptions may be. Once you file, the bankruptcy's automatic stay will temporarily put an end to any foreclosure actions and stay them for a period of a few months. However, once the stay is lifted, the mortgage company can foreclose on the home if payments have not been caught up. Often, filers find more money available once they file and are no longer paying credit card bills and more and thus do get things caught up.
Speak to a bankruptcy lawyer about concerns with your home and find out what can be done to protect it while you still get the debt relief you need.