Filing For Bankruptcy: Will I Lose My House
One of the primary concerns of people considering bankruptcy is whether it will affect their home or vehicle ownership. There is a lot misinformation regarding how the process of filing for a Chapter 13 or Chapter 7 bankruptcy affects property ownership.
Would you be surprised to learn that filing a bankruptcy may actually help you to save your property or achieve better payments with your creditor? In addition to the detailed information below, we offer a free consultation to discuss your questions and unique circumstances in more detail. Call us today at 866-261-8282 to schedule a convenient time at any one of our Michigan offices: Detroit, Ann Arbor, Flint, Southfield, Warren, Lansing or Dearborn.
Chapter 13 Bankruptcy and Home Ownership: Will I Lose My House In Bankruptcy?
A Chapter 13 bankruptcy is a debt consolidation plan designed to help you keep your home, assuming you have income to support making the payments. Filing the Chapter 13 plan will actually legally protect your home from foreclosure as long as the petition is filed with the court before the foreclosure sale occurs.
Other ways that the Chapter 13 program may help you keep your home or improve your payment terms:
When Your House Isn’t Exempt
Ordinarily, in a Chapter 7 bankruptcy, you must relinquish any nonexempt property to the bankruptcy trustee responsible for administering your matter. However, just because you can’t protect all of your equity doesn’t necessarily mean that you’ll lose your property.
Most Chapter 7 trustees won’t attempt to liquidate nonexempt property unless the effort nets a meaningful payment on your unsecured debt, such as credit card balances, personal loans, and medical and utility bills. In other words, after the trustee pays out the required amounts, there must be money left over. So, although there are no hard and fast rules when deciding whether to liquidate your home for the bankruptcy estate, the trustee will consider the following:
- the appraised value of the property
- costs of sale, including sales commissions, necessary repairs, inspections, etc.
- balances on any mortgages
- the existence of other liens, like tax liens, outstanding property taxes, mechanic’s liens, etc.
- whether the proceeds will be split with a co-owner
- how long the property will be on the market
- amount of the trustee’s commission, and
- amount of unsecured debt you owe.
Chapter 7 Vs Chapter 1: The Difference
Most people tend to file bankruptcy under Chapter 7 because its easier and the preferred option for people with few assets and no income. For some that still have income, Chapter 13 is a better option to catch up with their payments and keep their valuable assets.
In Chapter 7, its when you claim that you dont have any disposable income to pay off your debt. So, if you want to eliminate your debt, your assets will be seized and sold off so that you can pay a portion of your debt.
In Chapter 13, you have the option to keep all your assets, regardless of their value. Its when you enter into a debt repayment plan, so as long as you can keep up with the payment to your creditors, your properties are safe.
Its normal to fear losing your home after you file bankruptcy. Your house, though, can be exempt depending on how much its worth if you file Chapter 7 bankruptcy. However, you need to be current in your mortgage payments to keep your house.
The exemptions vary from state to state. In some cases, you can keep your house and some of your assets because their equity is lower than the bankruptcy exemption amount, which well explain more in the following sections.
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What Happens To Your Mortgage When You File Bankruptcy
Home loans, like mortgages, home equity loans, or home equity lines of credit are secured debts. This means the bank has a sort of ownership interest in the real estate. As long as you make your monthly payments, the home is yours to keep. If you donât pay your mortgage, the bank can take the house back by way of a foreclosure. Thatâs true even after you get a bankruptcy discharge.
Because of this, keeping your home means keeping your mortgage. Thereâs no such thing as a free house.
What If I Dont Want To Keep My House
Of course, not everyone sees their home as a benefit.
If youd rather get rid of it and find another place to live, then you can.
This choice is up to you, in most scenarios, you can keep your home unless you dont want it.
Need help with bankruptcy?
If so, then you need the help of a Licensed Insolvency Trustee.
Contact us now, and we will arrange an appointment to go through your financial situation in great depth.
Our team will help you figure out if bankruptcy is the right path, and how to retain your home if you choose to file for it.
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Home Equity In Chapter 13 Bankruptcy
Chapter 13 bankruptcy works differently. You won’t be forced to give up any property. Instead, you’ll pay for the nonexempt portion of the equity in your plan. Of course, if you have significant nonexempt equity, this could get expensive. You’ll have to demonstrate that you have enough income to pay all amounts required in your plan.
Example. You have $50,000 in equity in your house, but the maximum amount you can exempt is $30,000. You’ll have to structure your Chapter 13 payment plan so that your unsecured creditors will receive at least $20,000 over the life of the plan. That amount is in addition to any other debts your plan payment must cover, like mortgage arrearages and car payments.
Find out more about what happens to your home and mortgage in Chapter 13 bankruptcy.
But being able to protect or pay for your home equity isn’t enough. You’ll have other requirements you must meet, as well.
Keeping The Car Outside Of Bankruptcy
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act eliminated drive through car loan agreements for bankruptcies. Before the act, consumers and car lenders could continue with whatever agreement they wanted, ignoring the bankruptcy. While drive-throughs are now against bankruptcy rules, it still happens and courts rarely enforce it. When no intention to reaffirm, redeem or surrender the car is filed by the deadline, a car loan is dropped from the bankruptcy. In many cases, the car owner and lender continue to do business and always, and courts rarely enforce it. Of course, this only works for the car owner if theyre making payments on time.
Since this option is counter to bankruptcy law, its not necessarily something youd want to pursue, and it provides a lot less protection than going with one of the routes allowed by law.
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How You Can Keep Your House Through Chapter 7 Or Chapter 13 Bankruptcy
The most common types of consumer bankruptcy are Chapter 7 and Chapter 13. Once bankruptcy is filed, an automatic stay an order from the bankruptcy court that prevents creditors from trying to collect while the court oversees the bankruptcy case goes into effect. This automatic stay will stop foreclosure on your home, lawsuits, garnishments, and harassing collection calls. The stay lasts only until the bankruptcy proceedings are complete, but it will give you some breathing room and if you can eventually continue to make mortgage payments, you will not lose your home.
1. Chapter 7 bankruptcy, is the most popular type of bankruptcy. It is quick and gives you a fresh start as it will eliminate many debts, including those for credit cards, and you usually can keep your home.
There are some reasons why you can lose your home or other property in Chapter 7. This can happen if:
- you have stopped paying your mortgage or loan and cannot continue to pay it
- your house is valued over the exemption limits for a Chapter 7
However, you will be able to keep your home if you have been making your payments and can continue to make them in the future. You may also be able to keep your house through using exemptions.
Bankruptcy Exemptions In Newfoundland And Labrador
- Food and fuel required by you and your dependants for 12 months
- Clothing for you and your dependants up to $4,000
- Household furnishings and appliances up to $4,000
- One motor vehicle up to $2,000
- No limit on medical and dental aids for you and your dependants
- Items of sentimental value up to $500
- All pets are exempt from bankruptcy
- Up to $10,000 of equity in your home
- Tools of your trade or business up to $10,000
- Certain income and pension plans
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Where Do I File If I Havent Lived In The Same State Or District For The Last Six Months
Federal Law requires that the case should be filed where the debtor has lived for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period. 28 U.S.C. sec 1408. This means that the case should be filed in the bankruptcy district in which the debtor has lived for the greatest portion of the last six months.
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.
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How Provincial Exemptions Can Impact Your Home In Bankruptcyexample Calculations
So using Ontario as an example calculation, if you live in Ontario with a house worth $250,000 and your mortgage is $245,000, then you get to keep your home because you only have $5,000 in equity and the province allows you have up to $10,000 in net home equity and still keep your home. The $5,000 of equity would become even less once potential selling costs are subtracted.
However, if your home is worth $250,000 and your mortgage is at $200,000, then you would have to either buy out the surplus or sell your home to pay your creditors with the proceeds because your net equity would still be over the $10,000 limit .
How To Keep Your Home During A Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is quite different than a Chapter 13. In Georgia, if you file a Chapter 13 bankruptcy, you will continue making payments on your debts and in many cases you will keep your property. But your attorney will work with your lenders to establish a new payment schedule that you can afford .
This can be a good option if you have an income, and wish to keep your property , but you cant quite afford to pay your current bills and make ends meet. Your attorney can help you determine whether a Chapter 13 is likely to give you the relief you need, or if you are better off filing a Chapter 7 bankruptcy.
If you qualify for a Chapter 13 bankruptcy, and want to keep your property, it may be an attractive option. However, keep in mind that you must continue paying your debts. If you find yourself unable to afford your bills even after renegotiating the terms, you may end up back in the same situation again. This is a trap that your attorney can help you avoid.
Assuming you have the right financial situation, and youll be able to afford your bills, consider a Chapter 13 bankruptcy. The advantage is that since you agree to new terms with your lenders, you keep your home, your car, and any other property that you owe payments on.
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Which San Diegos Reputable Bankruptcy Lawyer Can Help Me File Bankruptcy
Certainly it has never been easier to file for bankruptcy, wipe out your debt and protect your home, especially with the help of the Law Offices of Mark L. Miller. Were here to help you maximize your bankruptcy claim. Our offices are located close to the African Museum Casa del Rey Moro, so youll have no trouble finding us. Contact us today to keep your house, protect the equity in your house and get out of debt.
How Filing Bankruptcy Can Make Paying Your Mortgage Easier
Your bankruptcy discharge wipes out most of your unsecured debts. Medical bills, credit card payments, loan payments, etc. all of the bills that are making it hard for you to make ends meet now are eliminated by a bankruptcy filing.
With debt repayment obligations gone, you can focus on the expenses that really matter: mortgage payments, utilities and regular living expenses.
Thatâs actually true if youâre renting, too. Rent will always need to be paid, just like a mortgage, electricity, water and other utilities. But as soon as the automatic stay kicks in, you’ll be protected from debt collectors.
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With Both Chapter 7 And Chapter 13 You May Be Able To Keep Your Home
So, while Chapter 7 and Chapter 13 bankruptcy are different, both can allow you to keep your home. And, because credit card and other debts are eliminated, making mortgage payments after bankruptcy will be easier.
Be aware that exemption laws do not protect all property a bankruptcy filing does not discharge all types of debts and there are different classes of creditors that may be able to seize your property. The attorneys at Fesenmyer Cousino Weinzimmer understand each of these distinctions and can provide the best legal advice to protect your assets. Call us for help today.
Can I Own Anything After Bankruptcy
Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt. You can also keep any property covered by Indiana bankruptcy exemptions through the bankruptcy.
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Check If You Can Stop Or Delay The Official Receiver Selling Your Home
You might be able to stop or delay your home from being sold if:
- someone else has a legal right about your home
- someone will buy your share of the home
- your mortgage covers most or all of what your home is worth – called low or negative equity
If someone else has a legal right about your home
The official receiver will usually only sell your home after youve been bankrupt for a year. This is because someone with a legal right about your home has more rights to keep it for a year after you go bankrupt.
If you need to keep your home for more than a year, youll need to show there are exceptional circumstances which mean you cant move earlier. For example, you might not be able to move earlier if someone you live with:
- is at school and needs to keep the support they get from school
- has a mental health problem
- is disabled, and the house has been adapted for their needs
- is over 70 years old
If you need to keep your home for more than a year, talk to an adviser to find out whether your circumstances are exceptional.
If someone will buy your share
You might be able to stop your home from being sold if someone agrees to buy your share of it.
It’s important to remember that you can’t just sign over your share of your home to someone else to avoid it being sold. If you want to sell your share, you need to do it at market value.
If your home is in low or negative equity
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.
Protecting Your House With Chapter 13 Bankruptcy
You can also retain your property if you file a Chapter 13 case rather than a Chapter 7 bankruptcy. Under Chapter 13 bankruptcy, you submit a proposed plan to make monthly payments for three to five years to a bankruptcy trustee who distributes those payments to creditors who’ve filed proper claims. In a Chapter 13 case, you won’t be required to turn over any property .
Before the bankruptcy court approves your payment plan, you have to meet two threshold requirements. The plan has to be a good deal for the unsecured creditors, and it has to be financially feasible for you.
- Best interests of creditors test. The bankruptcy court cannot approve a Chapter 13 plan unless the unsecured creditor debt, like credit cards and medical bills, will receive at least as much as they would have received if you had filed a Chapter 7 matter. In the example above, under Chapter 7, the trustee would have $18,000 to pay unsecured creditors’ claims. Therefore, under your Chapter 13 plan, you will have to make payments that will net at least $18,000.
- Feasibility of the Chapter 13 plan. Because you typically make your Chapter 13 payments with future income, the Chapter 13 trustee has to ensure that you can afford to make the payment each month. She will scrutinize your household and personal expenses and your income to ensure that you can afford the payments you propose in your Chapter 13 plan.