Thursday, July 19, 2012

Keeping your home in bankruptcy.

The first question many people is, is "What will happen to my house or car if I file for bankruptcy?"  The answer is, "you probably can keep both".

First, if you are current in you paying your mortgage payments, the bank cannot (repeat, cannot) take your home (in New Hampshire, where I practice).  Your home is unaffected by a bankruptcy filing, as applicable to the bank when you are timely paying the mortgage payments.  Many people face mounting credit card debt and/or medical bills but wisely keep paying for their home.  Bankruptcy can rid you of credit card and medical debt while you keep the home.

If you file Chapter 7, a Chapter 7 bankruptcy trustee will look at your house to see what it is worth, to determine if there is enough equity in the house to justify selling it and paying your debts. In most cases this does not happen, because due to the real estate market a great many homes are worth less than the mortgages on them.  In New Hampshire, where I primarily practice, the state allows an exemption of $100,000 in equity in your home which covers just about everyone. For example, if your house is worth $250,000 and you owe $150,000 on the mortgage, that would leave $100,000 in equity in your house; then, you apply the $100,000 NH state exemption to the $100,000 equity in the home and there is $0 left for creditors.  So, if the house has $100,000, or less in equity, the house is safe.

If you are behind in your mortgage payments, a Chapter 13 proceeding may help you keep your home because it allows you up to five years to pay the bank back the missed payments.  Also, if your home is worth less than the first mortgage on it, and you have a second mortgage or equity line, you can probably remove that second mortgage and never pay it again in a Chapter 13 bankruptcy proceeding.

As for your car or your personal belongs, in most cases the "exemptions" under your state or federal law allow you to keep them from the reach of your creditors.  A bankruptcy lawyer can do an exemption analysis of your property to determine that.  The average person's belongings are covered by most exemptions.

So, when it comes to protecting that roof over your head and your other property, and you are drowning in debt, don't despair - find out how Chapter 7 or Chapter 13 can help you.

Worried about what it will cost to talk to a bankruptcy lawyer? Don't - most good bankruptcy lawyers provide an initial free consultation, as does my firm.

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