It is normal that when it comes to bankruptcy there are a lot of questions. Many questions stem from how you will be able to manage your finances in the future. A popular question that is often asked when it comes to bankruptcy is: Will I be able to keep my house?
There is not a definite yes or no to that question, but the good news is most of the people that declare bankruptcy will keep their homes. There are a few factors involved that will determine if you are able to keep your house through bankruptcy.
Types of bankruptcy
Chapter 7 and chapter 13 are two types of bankruptcies. They both have differences, but the main difference is with exemptions. During bankruptcy it is assumed that everyone is trying to pay off debt, and if someone has property equity then it is assumed it should be sold to pay off their debt. But bankruptcy is intended to provide people with a fresh start and not leave them impoverished. This is where exemptions come in. An exemption means you can keep your house if it is lower than a certain dollar amount. If you have a regular income, you may be able to protect equity that exceeds the exemption through the Chapter 13 repayment plan. A bankruptcy lawyer can evaluate your unique circumstances and provide you with guidance.
The equity in your house
The equity of your home is the value of the house minus what you owe to mortgages or home equity loans. Most filers have very little or negative equity in their home, so their house would be exempt and not need to be sold. But if the equity in the home is above the exemption limit, it may have to be sold to pay debts. An individual may protect up to $21,500 of equity in his or her home – married couples who file joint may protect up to $43,000 of equity in their homes.
Can you continue to afford the mortgage?
If you kept your house after your bankruptcy and you continue to make mortgage payments, you are free keep your home. If you begin to miss monthly mortgage payments, the bank may foreclose on the home. However, mortgage payments may be easier after a bankruptcy since most if not all your previous debts will be wiped away. Moreover, it may be possible to make up past due mortgage payments during the bankruptcy process, if you file for Chapter 13 bankruptcy.