Bankruptcy laws are designed to treat both creditors and debtors fairly. This means allowing people the chance to recover from their debt while trying to ensure that creditors have a fair chance of receiving debt repayments.
There are situations where creditors look to use assets, such as a property, to repay part of or all the debts. However, given the importance of your home there are measures in place that allow you to keep it, even with massive amounts of debts that cannot be repaid.
Here are 3 ways to make sure you keep your home when filing for bankruptcy:
Get an Exemption Under Chapter 7
When filing for bankruptcy under Chapter 7, all property that is deemed non-exempt can be sold to pay off debts. You can apply to have your home exempt from this process, which is determined by the equity in your home, with exempt property not being sold by the trustee under Chapter 7.
To determine home equity and whether you can receive exemption you need to value your property and subtract this against your debts. For instance, if your property is valued at $500,000 but your mortgage is debt is $400,000, your home equity is $100,000. Should this be within the state exemption amount you can keep your home.
Exemption amounts differ from state to state, so you need to determine this when trying to obtain an exemption for your property.
Keep Current on Mortgage Payments
The status of your mortgage payments influences the likelihood of losing your home. For example, if you are not current on your mortgage payments and fall 90 days behind, then the lender can foreclose on your property.
An automatic stay does offer temporary relief from this but it is only a short-term solution. You can use an automatic stay to hold this off, attempt to have some debts discharged, which then frees up money to catch up on mortgage payments and avoid foreclosure.
File for Chapter 13
Chapter 13 bankruptcy involves working out a repayment plan for debts over a 3 to 5-year period. This means that you have a good chance of keeping your home as the debts are rolled into a single settlement plan that you repay over the agree term.
However, you must continue to make payments in this plan and ensure mortgage payments remain current throughout. Should these all be repaid on time as agreed throughout the duration of the plan, you exit bankruptcy and keep your property.
The Travis Law Firm provides professional legal representation for Chapter 7 & Chapter 13 bankruptcy services for residents of all cities in Riverside and San Bernardino Counties. We have offices in Riverside, San Bernardino, Victorville, Temecula, Cathedral City and Ontario for the convenience of our Inland Empire, High Desert, and Coachella Valley clients. For more information about our bankruptcy law services and other legal representation, call us today at 1-800-BANKRUPT or (951) 274-9501.