How to Keep Your House in Bankruptcy

You can keep your house in bankruptcy.  Ohio has exemption laws protect your home.  Currently, the law protects your equity up to over $132,000.  This not the value of your home.  Equity is the value of your home less what is owed on it.  If you own the home with your spouse, you can DOUBLE this amount.  You can keep your house in bankruptcy.

This means you could, potentially, file chapter 7, and own a home free and clear worth over a quarter of a million dollars.  The days of people losing their home in chapter 7 are long gone.  Yet, many people still believe that they will lose their house in bankruptcy.

Did people lose their house in bankruptcy in the past?  Yes!

Not so many years ago, Ohio exemptions were very poor. In fact, Ohio’s had not updated its exemptions for many years.  The residence exemption when I started practicing in 1986 was only $5,000.  Not much!

This created tremendous difficulty, particularly for older clients, who had worked hard to pay their homes off so they could retire.  In some cases, when they had to file chapter 7 bankruptcy, the house could not be protected in bankruptcy.  This is no longer a problem, but the myth lives on.  Today its common to keep your house in bankruptcy.

Can you keep your house and file chapter 7?

Most people do.  Because the Ohio exemptions are much better now, like the Federal exemptions, there are few situations where people have more equity in their home than can be protected.  And, there is no cap on how much your home can be worth and still file chapter 7.  Having filed tens of thousands of bankruptcy cases, I have yet to see a situation which, under current law, would put your home at risk due to its value.

How do I keep my house in bankruptcy?  Chapter 7?

If you have a mortgage on your home, you would want to be current on your mortgage payments to be sure you will be able to keep it.  Although the automatic stay which arises when a bankruptcy is filed will stop a foreclosure, you need to be current in order to keep your home.  If you’re not, then look into chapter 13 for ways to keep your house when you are behind on your mortgage.

However, if you are not too far behind in your house payments, you can file chapter 7, get rid of all your unsecured debt, and free up money to get current on your mortgage.  You could get into a forbearance agreement with your lender. This is how chapter 7 can help you keep your house in bankruptcy.

Do I need to reaffirm my mortgage to keep my house in bankruptcy?

No. Most mortgage companies in Southern Ohio do not even send out reaffirmation agreements if you want to keep your house in bankruptcy.  In years past, it was a common practice to see consumers sign reaffirmation agreements.  Modern practice is different.  Seldom do we see reaffirmation agreements.

This means that your mortgage is not reaffirmed, and technically you don’t owe it.  But your home can be foreclosed if you fall behind.  However, since you discharged your personal obligation on the debt in bankruptcy, you cannot be collected from.   There are other issues involving credit reporting on mortgages discharged in bankruptcy, discussed elsewhere on this website.

if you are considering bankruptcy, don’t worry that you will lose your house.  If you are current and want to keep it, there is no danger of loss. You can keep your house in bankruptcy in most cases.

To learn more about keeping your property in bankruptcy, call the experienced attorneys at West law office. We’ll explain how all of this works, why it’s best not to reaffirm a mortgage as  general rule, and how we deal with this issue and your credit.  We offer in-office, video and telephone appointments.

We can even do your entire case online.

Call (937) 748-1749 (Dayton/Springboro) or (614) 852-4488 (Columbus).

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