Filing Bankruptcy to Keep Your Home

Most people file bankruptcy because they want to keep an important asset such as a home.  A home has a lot of meaning to people because it is the place to go where people seek shelter, where they build family memories, and where they can stay warm.

When filing bankruptcy to keep a home, a person can choose between Chapter 7 or Chapter 13 bankruptcy. An experienced New York bankruptcy attorney can offer a wide array of information on Chapter 7 and Chapter 13 bankruptcy and why the two bankruptcy petitions are different.

When a debtor files for Chapter 13 bankruptcy, a debtor can keep a home. It does not make a difference whether a debtor is late with mortgage payments or have equity over the exemption amount in the home. If a debtor is late with mortgage payments, the missed payments will become part of the bankruptcy court ordered repayment plan.  The lender will not be able to file foreclosure on the property.  The moment a debtor files bankruptcy, there is an automatic stay on collection proceedings.

In Chapter 13, the debtor makes repayments to creditors over a three to five year repayment plan. The repayment plan is court monitored.  At the end of the repayment period, the rest of the person’s debts are discharged.

Chapter 13 bankruptcy is a longer process than Chapter 7.  Chapter 7 discharges all a person’s debts four to five months from petition filing.  Chapter 7 is suited for individuals whose equity in a house does not exceed an exemption limit.  When filing bankruptcy, a debtor estimates the value of a home to see if there is equity in the home, and if a trustee can take some of the equity.  To get the fair market value of a house, a debtor can for an appraisal by a certified real estate appraiser.

If a bankruptcy trustee suspects a debtor owns non-exempt property, the trustee may question the individual’s estimate value on a house to determine whether a trustee can take the property. If a trustee does an appraisal on a debtor’s house, the fees for the appraiser comes out of the bankruptcy estate.  This may confuse the debtor’s perception of who the trustee works for since it may seem like the debtor is paying for the trustee’s professionals.  Once a person files bankruptcy, the trustee controls the person’s assets. There is no clear rule whether an appraisal of a house is required in a bankruptcy.

To truly understand the difference between the two bankruptcy Chapters it is good to speak to an experienced NY bankruptcy attorney. Filing for bankruptcy is an affordable option to become debt free while staying in a beloved home.