Bankruptcy can save your home in some cases. In fact, avoiding foreclosure is one of the primary reasons that our clients come to us for help.
Saving your home isn’t simple. Here are the factors that will need to be taken into consideration as we attempt to help you.
A certain percentage of your equity falls under the Homestead Exemption in a Chapter 7 bankruptcy. The current exemption is $27,900.
That means if you have less than $27,900 then you can keep your home, provided that you reaffirm the debt after filing Chapter 7. Reaffirming the debt means you’ll continue to pay your house payments, which you might find easier once you no longer have to worry about paying a whole host of other debts.
You can also use your $1,500 wildcard exemption to bump your equity exemption just a little higher.
The Appropriate Bankruptcy Chapter
Chapter 7 is the easiest form of bankruptcy to file, but it might not be conducive to keeping your house. It also is not available to all borrowers, as you must pass the federal means test to file Chapter 7 at all. If you fail the means test or have too much equity it will be impossible to keep your home as your trustee will have to take the house, sell it, and use it to pay off your debts.
At that point Chapter 13 is the only option for borrowers who want to keep their home, available so long as you have a discretionary income that can be put towards your debts. Almost anyone who doesn’t qualify for the Chapter 7 bankruptcy plan qualifies for the Chapter 13; qualification is not a problem. Once qualified you will have to keep up with your plan payments. You will be paying off back or missed mortgage payments.
Once you are out of Chapter 13 you may still owe a balance on the home. If you want to keep it, you’ll have to keep paying your mortgage as normal.
Get Help Today
Figuring out how to make the best use of your bankruptcy exemptions and helping you decide which bankruptcy chapter to file in order to meet all of your financial goals is not easy and is not a layperson’s task. Bankruptcy law is exceedingly complicated. For some, bankruptcy won’t even be the right step for saving the home.
To take your first step towards saving your home, gather your financial documentation and reach out to our offices. We’ll help you go over your options and take your next steps.