Many people wonder if they can keep their home after declaring bankruptcy. Filing for bankruptcy can be a difficult time for anybody. People are understandably very emotional when it comes to bankruptcy because of all the hard work they put into their home. The memories developed through all the time spent with their family can make it a painful decision. A lot of people think that when you declare bankruptcy, you lose absolutely everything. Depending on how you structure it this can be true. We’re going to look at the difference Types of bankruptcy and see if keeping that home is a possibility.
Very rarely are there simple slam-dunk situations. Every situation is unique and requires a lot of strategic thought. Bankruptcy is undoubtedly an option in a lot of cases. However, there may be other options available as well. Depending on your priorities and how vital keeping your home is to you. You should speak to somebody and consider everything.
The average consumer has two options available to them for bankruptcy. The first option is chapter seven. This typically means you have little options for exemptions. Chapter seven acts very similar to liquidation, and it blankets most of your assets equally, but it’s restrictive on exemptions. This means if you cannot afford your payments for your mortgage you will not be able to keep your home. However, chapter thirteen is more flexible on exemptions. So if you run into financial issues, you can keep your home if you can afford the mortgage. Clearly beats going to foreclosure auction. The courts may allow you to exempt your home.
A reaffirmation agreement would need to be set up between you and the courts. This paper would allow you to exempt your home while continuing to pay the mortgage yet, still filing for bankruptcy protection. Bankruptcy is designed to help protect people and give them a new opportunity or a fresh start when they do face financial trouble instead of long loan modification process. The bankruptcy would still be on your record and would last the seven-year term.
Chapter seven would not allow you to keep your home because it is very restrictive with exemptions but you can use it if you also face a lot of credit card debt. It would also be helpful if you owed money on vehicles and other large items. You would be able to wipe your slate clean. You would be forgiven for the debt and continue to move forward.
Chapter thirteen will not allow you to reduce your first mortgage payment. The balance will also remain the same. This can be the case even if the home is underwater. You will need to keep up with your payments, property taxes and insurance. The primary advantage of chapter 13 is that you can minimize your other debts allowing your cash flow to go straight towards your home. This can be enough to lift the burden and a lot of situations.
Chapter thirteen is very flexible and has many uses. It’s applied in many different situations. There have been instances where people have filed for chapter 13 to buy themselves some time. For example, a couple that may have a child moving out shortly and they are planning to sell the home at a later date anyway. Chapter thirteen can work well in a situation like this allowing the owners to stay until the time to sell comes versus filing chapter seven or selling for cash.
There are situations where walking away from the property could be a better option. This would depend on many variables including how much Equity you have in the property. In some situations renting could even be a more significant advantage instead of taking on seven years worth of bankruptcy. A lot of this will come down to the age of the owners, the equity and where you stand financially in the future.
In conclusion, there are different types of bankruptcies and choosing the right one is essential based on your situation. It is possible to keep your home when you file for bankruptcy because of the exclusions under chapter thirteen. Working with the bank and filing bankruptcy is a far better option for most people then going to foreclosure.