The choice to file for bankruptcy is never taken lightly. Often, it comes with great sadness but is the right decision to have a clean start in life. Although bankruptcy involves clearing debts, many people are often worried about losing their house as a part of the bankruptcy process. Below, we will take a closer look at what goes into filing for bankruptcy, and how you may be able to keep your home following filing for bankruptcy.
What is Bankruptcy?
Bankruptcy is a legal proceeding that is intended to give you a fresh start. It occurs when a person, or company, cannot continue to pay his or her debts. This can be the result of a failing business or other personal circumstances that have led to overwhelming debt. The decision to file for bankruptcy can either be initiated by the debtor, or by a court order. Part of filing for bankruptcy will be the decision from the courts to sell items of value to help pay off existing debts. To many people who are filing for bankruptcy, this means that the value of the home could be used to pay off other accumulated debt.
What Type of Bankruptcy Are You Filing?
Whether or not you get to keep your home largely starts with what type of bankruptcy you are filing. There are two types of bankruptcy you can file for, chapter 13 and chapter 7. Under both types of filings, the federal government assumes that you have made every effort to pay off your debts before turning to bankruptcy as a final option. The filing then is intended to help give people a fresh start and not necessarily destroy their way of life, as taking away a home would do for many people. Between chapter 13 and chapter 7, chapter 13 tends to be more relaxed and flexible, often leading to home retention. Chapter 7 on the other hand is a bit more strict with fewer exemptions and can lead to people losing their home as a valuable asset that can be applied toward debt.
Can I Keep My Home?
Whether or not you will be able to keep your home while filing for bankruptcy depends on several factors. Of course, every person and financial situation is different, and it largely depends on your unique situation. Be sure to talk with an attorney to understand the implications surrounding your bankruptcy and home. The decision by the courts to allow you to keep your home may depend on the following:
- How much equity is in your home? Equity is the amount of value you have in your home. It compares the market value of your home to how much you have already paid toward the mortgage. In many cases, people filing for bankruptcy have little or no equity in their home, so it would do little benefit to sell the home. In other cases when the person has built up a large amount of equity, the house may be sold to cover the additional debt.
- Can you afford your mortgage? Part of filing for bankruptcy is getting a fresh start. After your debt has been largely erased the courts will look at your monthly mortgage payment. If you can make your payments fully and on time you may be allowed to keep your home. If you are not able to make payments though, the bank may eventually foreclose your home. Much of this too will depend on if your payments are current, or if your home has also fallen into your accumulated debt.
- Do you have a state exemption? Some states will put a limit or qualifier on the type of property that can be included in a bankruptcy filing. In some states, there is an exemption for a primary residence which means it cannot be included in the property sold to cover debts. This means that you would be able to keep your home. Regulations and laws vary from state to state and should be handled on an individual basis.
How an Attorney Can Help
Hiring an attorney that specializes in bankruptcy law can help you navigate through the complicated legal requirements for filing for bankruptcy. Not only can a lawyer help you collect your debt and make a decision toward bankruptcy, but a lawyer will be able to help determine the best course of action to allow you to retain your home.
Before hiring an attorney to help, make sure that you have found a professional law firm with specialized experience working with bankruptcy law in your state. The team at Adam Law Group is well versed in several different cases and circumstances that could lead a person to file for bankruptcy. Further, we are caring, professional, and genuinely interested in our clients’ wellbeing. To learn more about how we may be able to help you sift through a complicated bankruptcy proceeding, and potentially help you keep your home, reach out to our office today.