What Will Happen to Your House After Filing Bankruptcy?
One of the first questions that comes to mind when considering bankruptcy is, “What will happen to my house?” Being in an overwhelming financial situation raises concerns about what the future will look like. However, in most cases, you will not lose your house as a result of bankruptcy. There are several factors that determine whether or not you will be able to maintain ownership.
Every bankruptcy case is different, so it’s important to understand the components that make up your specific chapter filing. One of the most important steps in the filing system is determining what assets qualify for exemption. Read on to learn all the details from the attorneys at Groce and DeArmon in Springfield, Missouri.
Qualifications for Home Exemption
While filing bankruptcy, you are able to keep some of your assets. These assets are known as exempt property. Usually, you are allowed to keep your house because it is viewed as a necessity. Having home equity that exceeds the value of your home will be a consideration when filing for bankruptcy. In order to determine your home equity, you will take the home’s market value and subtract the amount of outstanding debt from your mortgage. You need your exemption to surpass your equity to increase the odds of maintaining ownership of your home.
Filing Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also known as the “liquidation bankruptcy” because trustees can sell some of your property to repay creditors. The total value of assets that are non-exempt will be an important factor for the liquidation process.
Having enough equity in those non-exempt assets to repay the creditors will make it easy to avoid the liquidation of your home. Another major factor is whether you are staying up to date on mortgage payments. If you are making payments on time, the likelihood of keeping your house is higher.
Filing Chapter 13 Bankruptcy
The main purpose of chapter 13 bankruptcy is to formulate a payment plan with the lender over a three to five year period. You are more likely to maintain ownership of your home, however, there is some difficulty with a chapter 13 filing. Along with the new payments to your lenders, you must also maintain your original mortgage payments. If you are able to pay both payments on time throughout the entirety of the plan, at the end of the contract you will be out of bankruptcy and you will keep your home. But if you fall behind on these payments, you have a higher chance of losing your home.
How Groce and DeArmon Can Help
We understand that keeping ownership of your house is a priority. At Groce and DeArmon, we will work with you during the entire filing process and be a resource to you even after the case is closed. Contact Groce and DeArmon to discover more about how we can help your case.