What Only Chapter 13 Bankruptcy Can Do
Chapter 7 and 13 each offer unique solutions to debt problems. The two bankruptcy types work very differently. For instance, how quickly your debt will get wiped out will depend on the chapter you file:
- Chapter 7 bankruptcy. This chapter takes an average of three to four months to complete. Learn more about erasing your debt in Chapter 7 bankruptcy.
- Chapter 13 bankruptcy. If you file for Chapter 13 rather than Chapter 7, you’ll likely have to pay back some portion of your unsecured debts through a three- to five-year repayment plan. However, any unsecured debt balance that remains after completing your repayment plan will be discharged. Find out how to pay off or discharge your debts in Chapter 13 bankruptcy.
Chapter 7 is primarily for low-income filers, and therefore, it won’t help you keep property if you’re behind on payments. But, if you have enough income to pay at least something to creditors, then you’ll be able to take advantage of the additional benefits offered by Chapter 13.
Here are some of the things that Chapter 13 can do.
Stop a mortgage foreclosure. Filing for Chapter 13 bankruptcy will stop a foreclosure and force the lender to accept a plan that will allow you to make up the missed payments over time. To make this plan work, you must demonstrate that you have enough income to pay back payments and remain current on future payments. Learn more about your home and mortgage in Chapter 13 bankruptcy.
Filing Bankruptcy When You Own The Car
A car loan is a secured debt, which means the car is collateral that can be taken back by the lender if you dont pay. When you file for Chapter 7 bankruptcy, you must list your assets on a form called Schedule A/B. Your car is an asset, because it has value. You must also file a statement of intention that that tells the court whether you plan to reaffirm your car loan, redeem the car or surrender it. If the statement of intention isnt filed within 30 days of when the bankruptcy is filed, the car loan is no longer part of the bankruptcy proceeding.
The first step to keeping your car if youre considering bankruptcy, is to determine its status. Youre either paying a loan, leasing or you own it free and clear. The status determines what you have to do to keep your car.
If youre making monthly payments on a car, its either a loan or a lease. If youre not sure which, check your agreement. If its a lease, you are renting the car and there are mileage limits that add costs when the lease ends and you return the car to the dealer.
If you are making monthly payments on a loan, the lender holds the title as collateral. Once youve paid for the car, you get the title and own it free and clear. If you cant make payments, the lender takes back the car back, which is repossession.
Being up to date on your car payments before you file for bankruptcy makes it much more likely youll keep your car when you file for either Chapter 7 or Chapter 13.
What Controls Keeping My Home After Bankruptcy
The decision to declare bankruptcy often comes at an overwhelming time of your life. If you’re thinking about declaring bankruptcy, the chances are that you’re worried about how you can manage all your finances now and in the future.
There are three factors that determine whether you can keep your home in bankruptcy proceedings:
- The Chapter of bankruptcy you file
- How much equity you have paid into your mortgage
- If you can afford your monthly mortgage payments while facing debt
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Consider The Equity You Have In Your House
Don’t worry, Chapter 7 filers, there are still ways you can keep your house. When deciding whether your house is exempt under Chapter 7, the trustee only considers the equity in your house.
Equity is the market value of your house minus the balance on your mortgages or home equity loans. Many bankruptcy filers have little or negative equity in their houses, so their houses are exempt and need not be sold in the bankruptcy process.
However, if you have equity in your home over the exemption limit, you may be forced to sell your house to pay your debt or “buy it back” by paying the trustee the value of your house.
Bankruptcy Exemptions In Manitoba
- Furniture and household appliances up to $4,500
- No limit on clothing for you and your family
- Food and fuel necessary for you and your family for six months, or the cash equivalent
- Tools of your trade up to $7,500
- One motor vehicle up to $3,000 when used for business or transportation to work
- Articles and furniture necessary to perform religious services
- No limit on health aids for you or your family
- If you are the sole owner of your home, up to $2,500 in equity is protected if you co-own your home, the limit is $1,500
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What Are My Chances Of Getting A Mortgage After Bankruptcy
Many people are able to keep their homes when they file an Assignment in bankruptcy. When you file an Assignment in bankruptcy it is the job of the trustee to maximize the realization for your unsecured creditors. This includes your home, if there is any equity in the property. Equity is the difference between what the house is worth and what is owing on the house, such as a mortgage, property tax etc. If the value of the house is approximately equal to what is owing on the house, the trustee may allow you to keep the house and continue making the payments. Therefore allowing you to keep your mortgage after bankruptcy.
If there is some equity in your property, the trustee still may allow you to keep your home on the condition that you contribute the amount equal to what the equity is worth into your bankruptcy estate .
Time Required After Bankruptcy Before You Can Buy A House With A Mortgage
The first requirement for applying for a mortgage after filing for bankruptcy is to wait for the judge overseeing your case to discharge or dismiss your bankruptcy. The exact waiting times necessary for getting mortgage loans after filing for bankruptcy depend on the following factors:
- Type of bankruptcy and
Bankruptcy usually is of two different types, which are as follows:
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Wages Benefits And Retirement Account Exemptions
There are exemptions to protect the money you receive as a benefit, support or what you have in retirement savings, including:
- Alimony, support, or maintenance that you reasonably need for your support
- Life insurance payments that you need for support
- All Social Security benefits, unemployment benefits, veterans benefits, public assistance and disability or illness benefits
- Under most circumstances, you can keep proceeds from your retirement accounts up to the maximum aggregate value of $1,362,800
Mortgage Options After Bankruptcy
Consumers have multiple options for so-called bankruptcy home loans. Once youve satisfied the waiting period, your next step is to find a lender willing to work with borrowers who have a bankruptcy in their credit history. Fortunately, this isnt as difficult as you may think.
Heres an overview of the loan options and requirements for mortgage approval after bankruptcy.
Conventional loan
Conventional mortgages follow guidelines established by Fannie Mae and Freddie Mac the two main agencies that buy and guarantee most mortgages in the U.S. Conventional loans have either a fixed- or adjustable interest rate, and terms typically range from 10 to 30 years.
Getting approved for a conventional mortgage after bankruptcy requires meeting the appropriate waiting period and demonstrating that youve reestablished your credit. This means paying your bills on time and keeping low balances on revolving credit accounts.
Requirements
- 3% minimum down payment
FHA loan
An FHA loan is a mortgage insured by the Federal Housing Administration. These loans typically offer lending requirements that are more flexible than conventional mortgages. FHA loans are available for 15- or 30-year terms, and rates may be fixed or adjustable.
Requirements
- One- to two-year waiting period
- 580 minimum credit score
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How Much Equity Do You Have
Equity is the amount of the house you own based on the amount of money youve paid towards the loan principal. In other words, it is the market value of your property after subtracting the amount still owed towards your mortgage or home equity loans. When bankruptcy filers have little or negative equity in their houses, they can take advantage of bankruptcy exemptions and can keep their houses.
Trustees only consider the equity in your house when deciding whether you qualify for the bankruptcy exemptions under Chapters 7 or 13. If you have more equity in the home than the exempted amount, you will have to sell the house to pay back your debt.
Will I Lose My House If I File Chapter 7
Home » Will I Lose My House if I File Chapter 7?
If you do not have significant home equity and the mortgage on your home is still current, you will not lose your house if you file for Chapter 7 bankruptcy. Most people who file Chapter 7 bankruptcy are able to retain all of their assets, which can include your house. However, if you are facing foreclosure, you might want to pursue a different route for filing bankruptcy, such as filing Chapter 13 bankruptcy instead.
If you are filing Chapter 7 bankruptcy and are worried about losing your house in Rutherfordton and other assets, you can work with a Rutherfordton bankruptcy lawyer to help you retain as many assets as possible.
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The North Carolina Homestead Exemption
In Rutherford County, you might be able to use the North Carolina Homestead Exemption to help you protect your home. According to this exemption, you may be able to exempt $35,000 of equity in your home.
Both spouses may be filed in the same application. However, if another individual also owns the house, they may file separately if they qualify for the exemption.
Also keep in mind that if you were temporarily absent from the home, that does not mean you are disqualified from the exemption. If your absence was due to health issues, and if your address is still your permanent residence, you may still qualify.
What Are Todays Mortgage Rates
Todays mortgage rates are at historic lows.
Typically, home buyers applying after Chapter 7 bankruptcy will be charged higher interest rates. But shopping around in todays low-rate market could help you net a fair deal on your home loan.
If youre thinking about buying a home, check with a few mortgage lenders to verify your home loan eligibility and find out what rates you qualify for.
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Do I Lose All My Assets When I File For Bankruptcy
Contrary to popular belief, when you file for bankruptcy, you will not lose everything. Each province and territory has its own exemptions to the bankruptcy law that outline which of your assets, and how much equity, you are allowed to retain. There are also certain costs and processes that apply across the country. Lets take a look at them below.
What If There Is No Equity
No equity means that you owe more to the creditor than the house is worth.
For example: you owe $400,000 to the bank on your mortgage, and the current value of the house is $320,000. This means you have no equity in the property and owe $80,000.00 to the bank.
Your trustee or a secured creditor can still make a claim against your house, even if there is no equity.
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Using Chapter 13 Bankruptcy To Remove Junior Liens
If you have a second or another junior lien on your homestead, you might be able to get rid of it through a process called “lien stripping.” Lien stripping is available only in a Chapter 13 case and only when your property is worth less than the primary loan balance.
To strip the lien, you’ll have to file a motion in the bankruptcy court and present evidence on the property’s value and the mortgage loan balances. If the court voids the junior lien, the debt you owe to that creditor will be treated in the Chapter 13 case as if it were unsecured. Any remaining balance will get wiped out with other qualifying unsecured debt at the end of the case.
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Buying A House And Car After Bankruptcy
Any honest bankruptcy expert or bankruptcy attorney can tell you:
- Bankruptcy will not prevent you from getting a house or a car. In fact, it might even be the fastest way for you to be able to buy a house or car!
- Usually what people are worried about is a car-loan or a mortgage. To buy a house you need good credit and a down payment. Bankruptcy can get you good credit quickly.
Consider two friends: Each has $30,000 in credit card debt.
Until today, both friends have been making minimum payments of $300 per month. Both friends get the money from their family and gifts and overtime that causes a lot of stress in their lives.
Friend One: files bankruptcy today and starts saving her gift money. Friend Two: does not file bankruptcy and keeps making minimum payments of $300 per month.
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The Provincial Exemption Limits For Keeping Your House When Going Bankrupt
The amount of net equity youre allowed to have to keep your home and still go bankrupt depends on which province you live in. Heres what the exemption limits are:
Alberta
Youre permitted to have up to $40,000 in equity if you completely own your home. If you are a co-owner, then the equity youre permitted is reduced proportionately by the percentage of the home that you own. So if youre 50% owner, your equity exemption would be $20,000. If youre a 33.3% owner, then your equity exemption would be $13,320.
British Columbia
Youre allowed to have $12,000 in equity in Vancouver and Victoria, but only $9,000 all other areas of the province.
Manitoba
You can have up to $1,500 in equity if you jointly own the home with someone else. If you are the sole owner of the home, youre allowed to have up to $2,500 in equity.
Ontario
Youre permitted to have up to $10,000 equity in your principal residence.
Saskatchewan
Youre allowed up to $50,000 equity in your active residence per owner on title . Unsecured creditors also cannot force the sale of your home.
Quebec
No amount of equity will make your home exempt from bankruptcy.
If You Have Multiple Mortgage Loans
Under Chapter 13, a borrower who has multiple mortgage loan on the same house can get all but the primary categorized as unsecured debt. That means they go into the category thats covered by your ability to pay, and likely wont have to be paid back in full. This only comes into play if you owe more on the house than its worth.
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How Can I Be Sure To Keep My House After Chapter 13
While you will be allowed to keep, or even purchase a house or other property after you file for Chapter 13 bankruptcy in Wisconsin, there are steps you will be required to take in order to retain or keep that ownership. You must:
- Pay your bankruptcy payments in full
- Pay your bankruptcy payments on time
- Never miss a payment
Debt reorganization is intended to assist you to in paying off your debt, while maintaining your property, though it can be challenging to follow the repayment schedule.
Many Wisconsin residents who have filed for Chapter 13 bankruptcy, find keeping up with the new payment schedule is still too challenging. If you share this concern, you may want to convert your bankruptcy filing from Chapter 13 to Chapter 7.
If this sounds like an option you might like to pursue, it is in your best interest to discuss your specific circumstances with a proven bankruptcy attorney in order to get the clearest picture of your options before deciding your next stepsespecially if you hope to convert from Chapter 13 to Chapter 7 and keep your house in Wisconsin.
If you would like assistance as you consider filing for Chapter 13 in Wisconsin, or if you would like to learn more about converting your Chapter 13 bankruptcy to a Chapter 7 filing, contact a knowledgeable bankruptcy attorney to discuss your options.
