When your financial situation has gotten to the point where you are considering bankruptcy, the stress can be almost debilitating. You understand that a bankruptcy can take away a lot of that stress, but you are likely worried about losing your home in the process. The good news is that you will not necessarily lose your home. While it is possible, a bankruptcy attorney can look over the entire situation and advise you of ways you can keep your home. Here are a few things you should know before your initial meeting with the lawyer.
A Chapter 13 bankruptcy is also called a reorganization. You are able to keep many of your possessions, including your home. However, you must have some type of repayment plan in effect for three to five years. During this time, all your debt will be considered and a bankruptcy trustee will determine how much each creditor will be paid monthly. At the end of the repayment term, any remaining unsecured debt will be forgiven. You will no longer owe this money. Secured debt, such as your mortgage or a car payment, will still be owed. It will be up to you and your bankruptcy attorney to renegotiate the terms of the repayment. It is important to note here that you can be behind in your mortgage payments and still be able to keep your home with this bankruptcy.
In a Chapter 7 bankruptcy, you may indeed lose your home. This is true if you are behind on your payments when you file or if you have more equity in the home than what is considered exempt for your state. For example, if your home is worth $200,000 and you still owe $100,000, you have $100,000 in equity. If the state you live in has an exemption of $100,000 or more, you can keep your home. However, if the exemption is less than that, the trustee may sell you home and use your equity to pay off your creditors. Also, if the equity amount is less than the exemption but you are behind on your payments, the mortgage holder may demand the house be sold to pay off the loan. In this case, your bankruptcy attorney will work with you and the mortgage company to find a way to bring your mortgage current before filing bankruptcy.
Anytime you are considering bankruptcy, you need to go over everything with a lawyer. He or she will take your income, your debts, and your assets into account and determine the best course of action for you. Trying to do it all without legal help could cost you all your assets and valuables, including your home.