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Declaring Chapter 13 And Keeping Your Home In 2018

Filing for bankruptcy can be a terrifying prospect and, people face this scenario every day. This problem leads to many more questions regarding what you can keep and what you cannot. Often, the first question that comes up is; If I declare bankruptcy will I be able to keep my home? It's not an easy question to answer because many factors come into play. Let's take a look at some details and see what could apply in certain circumstances.

Be sure to explore every possible option. There may be possibilities available to you that you may not have thought of or are even aware of up to this point. In some situations, even a loan modification might be an option. In other circumstances talking to a real estate investor might help in different ways. The point is, be sure to look at every avenue and see if there are opportunities helpful to your specific set of circumstances.

There are two main types of bankruptcies available to the average consumer. The first one is chapter 7 and the second one is chapter 13.  You will benefit in different ways depending on which one you choose. Filing Chapter 7 is very similar to liquidation. In this case, all of your assets are at risk for settlement to pay back creditors. Chapter 13 is very similar to setting up a payment structure. If the payment structure is practical, in a lot of cases, you'll be able to keep your home.

If after filing for bankruptcy, you can still afford to pay your mortgage, you can keep your home. If you would like to keep your home in a bankruptcy situation, you will need to go to the court and get a reaffirmation agreement set up. The reaffirmation agreement is stating that no matter what, even after filing bankruptcy you are still responsible for your mortgage payments.

Where are you are with your mortgage and how much equity you have in the house is relevant for each type of bankruptcy. However, chapter 13 allows you more exemptions and gives you a bit more flexibility or freedom on what you can retain in your possession versus having to short sell. The federal government designed bankruptcy to help people, but it is handled differently in each state. So for example in some states, if your exemption is greater than your equity you can stop the trustee from selling off your home.

There are some circumstances where walking away from the property might be better than keeping it. Once again, it comes down to the equity you have in the home at the time you file for bankruptcy. I have seen where lawyers have advised clients to walk away completely when they file for bankruptcy because it might cost them less to rent a comparable home or they may owe more on the property than what it's worth. So in instances like that, it might be silly to negotiate exemptions in chapter 13 attempting to pay off the property. Those type of scenarios can be a real problem, mainly if this would restrict your ability to come back financially after filing for bankruptcy.

So to conclude, bankruptcy may be a viable option depending on the circumstance. You will want to know where you stand financially with the equity in your home if you plan to keep it. There are some exemptions available through filing chapter 13. Bankruptcy is a scary word, but it is designed to help give you a fresh start and move forward with your life.