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How Does Bankruptcy Affect Your House
About 1 in 4 people who filed bankruptcy with Hoyes, Michalos own a house. In all cases we can show you how to keep your house, even if you decide to claim bankruptcy.
There are options to keep your home in a bankruptcy but the best approach depends on the value of the house, the amount owing on the mortgage, and your household budget. We will focus on three possible options:
How to claim bankruptcy and keep your house
Under Ontario law, if the equity in your home does not exceed $10,000, all you need to do to keep your home is maintain the mortgage payments. Your mortgage lender cannot foreclose on your home just because you went bankrupt. Some other provinces have similar exemptions that allow you to keep a certain equity in your house, you can;research other Canada laws around bankruptcy and home equity;here.
But what if the equity in your home exceeds $10,000?
Should you declare bankruptcy while your house is worth more than $10,000 above the mortgage and you want to keep your home, you will need to pay the bankruptcy trustee the equivalent of any equity value in your home.
Your Licensed Insolvency Trustee will advise you to get an appraisal on your house as part of the assessment process in order to determine just how much equity there might be. If you can afford to buy out this equity, bankruptcy can still be a solution to eliminating your other debts.
What Doesnt Bankruptcy Do
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of secured creditors. A secured creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, some student loans, court restitution orders, criminal fines, and some taxes.
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan. Discharge debts that arise after bankruptcy has been filed.
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Keeping Your House Depends On Where You Live
Its very, very state-specific, says debt relief expert Michael Bovee, who is the co-founder of debt relief company, Resolve. If you live in Florida or Texas, youre in good shape, but in some states, you could be out of luck.
Thats because with a bankruptcy, youre allowed to exempt certain assets like your home, car, jewelry and household goods. But how much you can exempt varies quite a bit from state to state.;
Can I Get A Credit Card After Bankruptcy
Yes, there are several options available. While technically not a credit card you could use a bank or debit card to perform activities for which you normally would use a credit card. You also may be able to keep the credit card you already have if the creditor grants approval. If these options do not work you can get secured credit card which is backed by your own bank account.
Can I Keep My House Or Car
The Law Office of David M. Serafin has assisted numerous bankruptcy filers in Denver and other areas of Colorado not only stave off foreclosure or repossession, but also save money by filing for bankruptcy.
In a chapter 7 bankruptcy, known for being a quick and simple means of eliminating debt, its still very possible to keep your house or car if the value of the property is under the applicable Colorado Homestead Exemption and so long as youre current on the mortgage or car payment. And, if your vehicle is upside down in equity, you may be eligible for a Section 722 Redemption. Redemption allows you to keep the vehicle by paying only for its fair market value if you can either pay in a lump sum the value of the vehicle or obtain financing to do this.
Back when property values in Denver and the rest of Colorado were much lower due to the financial crises, we could file a motion to determine secured status of a second mortgage. If your house was upside down as to the first mortgage alone, the second mortgage could be stripped off . For example, the second mortgage could be stripped off and determined to be unsecured for a house worth $400,000 with payoffs on the first two mortgages of $420,000 and $50,000, respectively. In this example, the house would be underwater as to the first mortgage alone.
Your Car In Chapter 13 Bankruptcy
Readers who filed for Chapter 13 bankruptcy were also very likely to keep their cars. If youre behind on your vehicle loan, you can use a Chapter 13 plan to catch up with your overdue payments , but you also have a couple of other options that dont apply to house loans. In Chapter 13, you might be able to stretch out the car payments over a longer period. Or, if the car loan is old enough, you might even be able to lower the balance on the principal and your interest rate.
I wish wed known that it would hurt us to sell a car before entering bankruptcy.
Sally, 48, Illinois
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What Happens To Nonexempt Property
The fate of your nonexempt property depends on the type of bankruptcy you file.
- Chapter 7 bankruptcy. If you file for Chapter 7 bankruptcy, the trustee will sell your nonexempt property and distribute the proceeds to your creditors. However, the trustee might let you buy back your motorcycle, boat, or any other nonexempt item if you can afford to do so. You can learn more about exempting property in a Chapter 7 Bankruptcy Exemptions: What Can I Keep? Youll find answers to specific exemption questions in Chapter 7 exemption FAQ.
- Chapter 13 bankruptcy. By contrast, you keep all of your propertyboth exempt and nonexemptif you file for Chapter 13 bankruptcy. Of course, nothing in life is free. Heres the catch: Youll have to pay your unsecured creditors an amount equal to your nonexempt property over your three- to five-year repayment plan or your disposable income, whichever is more. So you can expect, at a minimum, that each dollar of nonexempt property you keep will increase the amount you pay into your repayment plan by a dollar.
Because your case is unique, its strongly suggested that you meet with a bankruptcy lawyer. A bankruptcy attorney can tell you which chapter will be best for you and what will happen to your property, as well as the cost of filing a Chapter 7 case versus the cost of filing a Chapter 13 matter.
Can A Bankruptcy Trustee Take My Home
Itâs not common, but itâs possible in certain circumstances.
The bankruptcy trusteeâs job is to sell non-exempt property for the benefit of unsecured creditors. That includes personal property and real property. Whether your home is safe from the trustee depends on whether it has any ânonexempt equityâ which in turn depends on its market value.
As a reminder, hereâs how we calculate equity in this scenario:
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Tenants In The Entirety In Chapter 7
Pennsylvania has a specific exemption for homes owned by married couples. When you own a home jointly with your spouse, it will typically be deeded as tenants in the entirety. Under this exemption, the property is protected from any creditor if only one spouse owes the debt. That last part is very important when filing Chapter 7.
To understand how the concept of tenants in the entirety affects a Chapter 7 bankruptcy, imagine an older married couple who have paid their mortgage paid off but owe a significant amount of credit card and medical debt. They are on a fixed income, cannot pay all of their monthly bills, and are considering filing Chapter 7.
Is their house safe? The answer depends on one factor: who owes what debt. Under these circumstances, the federal homestead exemption provides this couple no help. If they used the federal exemption, the trustee would sell their home to pay their creditors. However, the Pennsylvania exemption could be beneficial. If none of the debt is shared, then the house is protected from any collection action from the individual creditors. Unfortunately, if the couple had any joint liabilities or shared a credit card, this exemption would not be available for that particular debt.
Losing Your Home In Bankruptcy V Losing Your Home In Foreclosure
You’ll want to be able to distinguish between losing your home in bankruptcy and losing your home outside of bankruptcy . These are two separate processes.
If you’re behind on your mortgage payments, you’ll eventually lose your home in foreclosure outside of bankruptcy, even if the bankruptcy trustee doesn’t sell your home.
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Are Debts Affecting Your Ability To Keep Up With Your Mortgage
Ask yourself this question: If I could deal with all of my other debts, would paying my mortgage be easier? We help people answer that question every day.
Its your home, so you always pay your mortgage, but you are falling behind on your credit cards and other bills, and you worry that you may soon also fall behind on your mortgage payments. You worry that you may lose your home.
You can file bankruptcy even if there is equity in your; home. If you owe more money to your creditors than the value of what you own you are considered insolvent. If you are insolvent you are eligible to file for bankruptcy or proposal in Canada.
With up-to-date mortgage payments filing for bankruptcy does not mean you will automatically lose your house. In fact, by eliminating other debts that are making it difficult to keep up with your mortgage payments.
Can I Keep My House And Car In Bankruptcy What Readers Had To Say
One of the first questions people have when theyre thinking about bankruptcy is whether they can keep their house and car. For most people, these are the most valuable things they own, and they dont want to lose them if at all possible. To get a better idea of what happens with homes and vehicles in bankruptcy, we surveyed our readers across the United States about their experiences. Heres what we learned.
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If Youre Behind On Your Mortgage Payments
With Chapter 7, if you are behind on your mortgage payments and cant catch up, you can surrender your house. If you want to catch up on payments, there is no provision under Chapter 7 to do that, so, as mentioned before, it should be done before filing for bankruptcy.
One of the biggest benefits of Chapter 13 is that it makes it easier to keep your house, including catching up on payments. Payment plans allow a mortgage modification with a bank that can spread missed payments over the life of the plan, three to five years, and also require current payments be made.
In either case, if the bank is going to foreclose on your house and you know you wont be able to stop it, and you plan to file for bankruptcy, file for bankruptcy before the foreclosure. If the bank sells your house after a foreclosure but doesnt make back what you owe them on it, there is a deficiency judgment, which means you owe the bank the difference. If the foreclosure happens as a result of the bankruptcy, there is no deficiency judgment.
In Indiana What Property Can I Keep
In a chapter 7 case, you can keep all property which the law says is exempt from the claims of creditors. Indiana exemptions provides a list of the exemptions available for Indiana. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didnt file bankruptcy.
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Q5 If My House Is Seized When Do I Move Out
When the trustee decides to sell your home, you will have a few weeks to find alternative arrangements and move out. You dont have to worry about immediate eviction. Sometimes, the trustee can allow you to stay until your house is sold.
Even when the trustee decided not to sell your house, and youre facing foreclosure, youd lose your home eventually.
When you file bankruptcy, the automatic stay will be in place. That means your lender should stop collecting from you and the foreclosure process ceases temporarily.
If you decide to surrender your house, you may still have 30 to 60 days before you must move out. Thats because the lender needs to file a motion to lift the automatic stay and follow the proper foreclosure process that will take that much time.
Sometimes, lenders dont resume the foreclosure process until after the court has released your written debt discharge. That happens four to six months after you file bankruptcy.
Risks For Homeowners Facing Foreclosure In Pennsylvania
Homes are at risk by more than just mortgage companies. Other creditors can bring lawsuits and if they are successful in obtaining judgments against a homeowner, that judgment allows them to attach a judicial lien against any property the homeowner has. If there is any equity in the home, this essentially converts an unsecured debt to a secured debt, meaning the creditor now has some additional rights, including the right to foreclose on the property. While it may be unlikely for a credit card company that is owed a small balance to front the costs and go through the process of filing for foreclosure, it is still an option they have available. However, not only would they have to pay the costs of bringing the foreclosure action, they would also have to pay any other liens that are attached to the property ahead of them. This can include tax liens, but most commonly refers to first or sometimes second mortgage loans. However, filing a bankruptcy can stop such a creditor from being able to proceed. Filing a bankruptcy before any unsecured creditors actually obtain a judgment against you is even better, as now there is not a lien attached to the property, meaning one less issue to worry about in your filing process.
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Q2 Will The Trustee Immediately Sell My House
If you have significant nonexempt home equity you cant protect, the trustee will sell your property, following the usual real estate selling process. The trustee doesnt need to rush the sale because a quick sale would usually result in lesser value for your home, which is not going to benefit you.
Q3 Will I Get A Fair Value For My House
The trustee will hire a real estate broker upon the courts approval, list the property for sale, and find a buyer. It will be sold based on fair market value. You can hire a licensed real estate appraiser to do a full house appraisal, which can be expensive. Alternatively, your appraiser can do a comparative market analysis to determine the value of your home.
The trustee will also appraise your house, and if theres a disconnect, the court will weigh in both assessments and decide on the final value. The court will also need to authorize the sale of your house to the chosen buyer. Then, the creditors will be notified of the sale and given a chance to object.
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