One of the hardest financial decisions a person must make is whether to file for bankruptcy. For many people, if they are thinking about this overwhelming decision, their main worry is whether they will be able to keep their largest, most important investment: their home. Although it is advisable to contact a Tulare County bankruptcy lawyer, this article will provide some basic information about what to expect when filing for bankruptcy.
What Are the Chances of Keeping My Home Through Bankruptcy?
It depends. Many people who file for bankruptcy can keep their homes through bankruptcy. However, some people are unable to keep their homes. The chances of keeping a home through a bankruptcy proceeding is increased by hiring a Visalia bankruptcy attorney.
There are three factors that will impact whether a person can keep their home through bankruptcy proceedings – type of bankruptcy files, amount of equity on the home, and whether a person can afford the mortgage.
- Type of Bankruptcy Filed
There are two types of bankruptcy proceedings: chapter 7 and chapter 13. The main difference between the two types of proceedings are the exemptions to which a person is entitled. The government assumes everyone wants to pay off their debts, so in a bankruptcy proceeding, property exceeding a certain value is sold to pay off the money owed by the debtor.
However, federal and state bankruptcy laws are designed to give a person a fresh start, not leave a person homeless and impoverished, so there are numerous exemptions. This means that any property under a certain dollar amount will be kept by the homeowner.
Chapter 7 exemptions are much stricter and lower than chapter 13 exemptions. Therefore, a person who files Chapter 13 bankruptcy is much more likely to keep their home through the proceedings because the restrictions are more lenient than chapter 7.
- Amount of Equity in the Home
The trustee only considers the equity on a person’s home when deciding whether their home is exempt from chapter 7 bankruptcy.
What is equity? It is the market value of your house minus the balance on either the home equity loans or mortgages. For many people who are filing for bankruptcy, they have negative equity on their home.
A person who has negative equity on their home will not be forced to sell their home during the bankruptcy process. However, if a person has equity on their home over the exemption limit, they will be forced to sell their home to pay off their debts or to “buy back” their home from the trustee.
- Whether Person Can Afford Mortgage
Assuming a person has managed to keep their home through the bankruptcy proceeding, they must be able to pay their mortgage to keep their home. For many people, once they are free of other financial burdens, it is easier for them to pay the mortgage on the home. If so, the person can keep the home.
A Visalia bankruptcy lawyer can tell you more about the factors that impact whether a person can keep their home through bankruptcy proceedings. Call our Visalia bankruptcy attorney for more information on what to what expect during the process of filing for bankruptcy.
It can be impossible to pull yourself out of a financial tailspin. A Visalia bankruptcy lawyer can help you identify the right steps to take if you are facing the prospect of losing your home due to financial difficulties. Contact Labiak Law, a Tulare County Bankruptcy lawyer, today for more information about how to get out of the red and into the black.