Chapter 7 is known as the liquidation form of bankruptcy because there is a small chance that some filers can lose property. Many chapter 7 filers are worried about their homes when they file, but how things go can depends on the wishes of the filer and their total financial situation. Read on and find out more.
Keeping Your Home Through Bankruptcy
Many homeowners want to continue being homeowners and it's easy to see why. Real estate prices have skyrocketed across the country and many that don't already own a home may need to wait a long time before they can do so. Also, a home is more than just bricks and mortar – it represents happy memories, good neighbors, and a sense of security. If you are fearful of losing your home when you declare chapter 7 bankruptcy, here is what to do:
- Determine the value of your home by having it appraised. Then, subtract your mortgage balance, if any, from that value.
- Determine what kind and how much of an exemption is available for a homestead in your state.
- If you are behind on payments, would it be possible to catch up on them if you no longer had to pay other bills like credit cards and other debts that would disappear with a chapter 7 filing?
- Discuss the results with your bankruptcy attorney. Most filers don't lose their homes, but every situation is unique.
Letting the Home Go
Not everyone wants to keep their home and some don't mind losing it through bankruptcy or foreclosure. As far your future goes regarding owing a home, surrendering to the bankruptcy trustee may appear better on your credit report than a foreclosure. However, that will only happen if its value exceeds the state exemptions for a homestead.
Another issue is owning a home that is worth a lot less than is owed because of declining home values and other reasons. Staying in a bad situation may not be a good idea and your fresh start could allow you to save money up for a down payment on a new home in a few years. However, be aware that renting now is perhaps even more expensive than buying.
It's important for filers to understand what effect a chapter 7 filing will have on all their secured debts. In most cases, that includes a mortgage, auto loans, and a few others. When there is property attached, the property can be lost with bankruptcy like chapter 7. If you have a lot of property that could be lost, talk to your bankruptcy lawyer about using chapter 13 instead of 7. Look into a firm like Ozment Law PA for more information.Share