One of the most common and important questions asked by a client during the initial bankruptcy consultation is, “Can I keep my house?”
The happy answer is, “Yes.” However, every client’s case is different and requires a skilled and experience attorney to evaluate your situation and help you choose the appropriate debt relief process.
The first question is whether there is equity in your home. Every state allows the debtor to exempt home equity from creditors during bankruptcy. Home equity is simply the difference between the amount that is owed and what the property is worth. If you have more equity in your home than can be exempted, you may need to consider either a Chapter 13 repayment plan or a non-bankruptcy option for debt repayment. In a Chapter 13 the debtor pays the amount equal to the non-exempt home equity to unsecured creditors (like credit cards and medical bills) over a three to five year period. If Chapter 13 is not a feasible option, the debtor may want to consider borrowing against the home equity to pay unsecured creditors.
The second issue is whether you can afford to keep the home by making the monthly payments. A home mortgage is a secured debt which must be paid or you must surrender the property back to the mortgage holder. When circumstances have changed and you can no loner afford to keep your home, the bankruptcy laws can help you to leave on your terms without any lingering debt.
In some cases a third issue is present: the debt is more than the value of the house. In those cases bankruptcy may help either through lien stripping an entirely unsecured second mortgage, or by encouraging the mortgage holder to negotiate for a modification and reduction in principle. Typically the mortgage holder does not want your property, and is usually willing to discuss payment options once a bankruptcy case is filed.
Finally, some debtors are facing foreclosure from an uncooperative mortgage holder. A Chapter 13 bankruptcy can be used to force the mortgage holder to accept payments that cure mortgage arrears over three to five years.
There are many options available for saving your home. The attorneys at Haines and krieger can discuss the pros and cons of each and help you decide which option is best for your family. Use the federal law to your advantage and discover how the bankruptcy laws can help you keep your home. Contact us for a free consultation today.