Bankruptcy is a complicated process for a variety of different reasons, not the least of which being that a lot of people do not really know what it entails. All too many people go into the process not knowing exactly what they will have to give up, and such a feeling can either lead to needless anxiety if it is not as bad as they imagined, or perhaps even being unprepared for how bad it turned out for them. In order to avoid both of these situations, we will discuss one specific topic: what happens to your house when you file for bankruptcy?
What Happens to My House if I File for Bankruptcy?
When it comes to bankruptcy, what you stand to lose is the biggest anxiety you will likely be worrying about. Not the least of which, of course, is whether your house will be safe in the event that you do. After all, we at Adam Law Group would not want to have to worry about such an anxiety ourselves, just as you would not want to have to worry that you are going to lose your shelter, one of the most important things to anyone. The safety of your house is ultimately going to depend on multiple circumstances, regardless of whether you file for chapter 7 bankruptcy or chapter 13 bankruptcy. Ultimately, regardless of the form of bankruptcy that you file for, you are not going to be made homeless as a result.
If you file for Chapter 7 bankruptcy, keeping your home is a matter of obtaining an exemption for your home from the bankruptcy proceedings, as well as making sure that you are current on your payment. Your property will be put into a “bankruptcy estate,” and at this point, you will have protected property that is reasonably required for you to continue to earn in order to pay what you owe. This exception, at least as far as filing for bankruptcy, is specifically what ensures that you will keep from being homeless, although you may still be at risk for other reasons of losing your home, so be mindful of that. You also have to make sure that you are not behind on your mortgage payment when you file; the bankruptcy process will help a bit, but it is more of a delay of the inevitable if things are falling behind there. In this kind of situation, your best bet is to instead go with a chapter 13 bankruptcy filing. Chapter 13 has a special function, wherein you will be granted a 3-to-5 year payment plan to catch up on your mortgage payments. This means that you cannot have your home taken from you during this period, so long you continue to pay off your mortgage over this 3-to-5 year period. Even if you are not late when you file Chapter 7, you should also consider whether you will be late afterward, which could create new ramifications for you that may be avoided if you go for filing Chapter 13 instead. If you have a junior lien on your home, you can also have that taken away through a process called “lien stripping,” depending on whether your property is found to be worth less than the balance on your primary loan. Just make sure that you do not misunderstand and think that Chapter 13 is just a get out of jail free card, as you still have to take care during the process that you continue to pay until all of your relevant debts have been handled.
One of the big advantages that people see for Chapter 7 bankruptcy is that it is a much quicker and simpler process, and lets you get done with the process a lot sooner. This is an ideal choice for people who can manage to and wish to get everything done as soon as possible. Meanwhile, if keeping your home is not something you can guarantee over a shorter period of time, filing for Chapter 13 bankruptcy is a lot safer, if not lengthy. Just be careful to recognize whether you are financially able to handle the quicker process if you do go with the former instead of the latter.
Property may be safe as well, even if it is non-exempt, if the trustee deems it to not be worth their time and money to obtain in the first place. Ie, if they would incur debt for something of low value, they may find it worthwhile to just leave it alone. You can also negotiate with the trustee in order to keep one form of non-exempt property if you offer up enough exempt property in its place to keep it. If you would like to keep a non-exempt household, for instance, you could do that arrangement to facilitate that, or even borrow money and offer to pay off through that in order to keep that house.
Ultimately, the process can feel terribly complicated and stressful, even for the most level-headed of people. The prospect of potentially losing your house, especially if you do not handle it properly, can be a source of great anxiety. Allow bankruptcy specialists like those at Adam Law Group help you through it all.