If you file for chapter 7 bankruptcy what happens to your home? Many individuals make an assumption that filing for bankruptcy under chapter 7 means the automatic loss of their home, but this may not always be the case. Fear of losing your home may keep you from filing for bankruptcy, but a qualified bankruptcy attorney can explain all of your options so that you may be able to keep your home while still getting the debt relief that you need.
For many individuals chapter 7 bankruptcy will allow a significant amount of personal property to be kept by the debtor, and this may include any home or home equity. Whether or not you can file for bankruptcy under this chapter and retain possession of your home will depend on numerous factors. It is important to remember that each bankruptcy case is different and unique. The available exemptions in your case, the amount of equity that you have built up in the home, and other considerations all have to be examined.
Any property that is not covered by exemptions may be liquidated during a chapter 7 bankruptcy. After liquidation the proceeds will be used to pay off creditors. Usually chapter 7 cases do not involve large amounts of property though, and in many cases the exemptions allowed will cover all of the property that you own. If you are like many homeowners today you may have little or no equity in your home, and you may even owe more than the home is currently worth because of the recent housing market problems. This is called being underwater. If this is the case then the bankruptcy trustee will not try and take possession because your equity amount is nonexistent.
If you do have some equity in your home and you file for chapter 7 bankruptcy then an experienced bankruptcy attorney may be able to use the homestead exemption allowed under the bankruptcy laws to protect you against losing your home. Because the home is considered a secured debt you can not eliminate the mortgage owed and keep the home, but if you continue making payments and reaffirm the debt then you will normally be able to keep the home.
You may be able to choose from various federal and state exemptions for any home equity that you have, and the amount of the exemption allowed can vary according to which set the exemption belongs to. Bankruptcy law also allows a wildcard exemption that can be used for almost any asset, including your home equity. If the homestead exemption amount allowed does not fully cover the equity amount that you have in the home then a qualified bankruptcy attorney may use the wildcard exemption to help cover any additional equity amount left.
If you are having financial difficulties but are concerned about losing your home if you file for chapter 7 bankruptcy then you should consult an experienced bankruptcy attorney immediately. This legal specialist can help you keep your home in many cases, and offer invaluable advice to help you deal with your debt once and for all.