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Chapter 7 v. Chapter 13 Bankruptcy: Will I Get To Keep My Home?

12/4/2011

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One of the greatest benefits of filing for a bankruptcy is an automatic  stay on all of your debt.  Once a bankruptcy petition is filed, an automatic  stay prevents any and all creditors from doing anything to enforce a claim  against a debtor and it temporarily suspends foreclosure action against your  home.  

An important aspect to consider is whether the equity in your home is greater than the homestead exemption. 

California has an Automatic Homestead Protection exemption  that allows you to maintain your home if your equity is  as  follows:

      ·  Automatic Homestead  for any Debtor: $75,000.00
      · The Debtor’s spouse  or a minor dependent is living in the residence: $100,000.00
         ·  The Debtor is a  senior, disabled, or 55 years of age or older: $175,000.00

If the  equity in your home is greater than any of the examples illustrated above,  Chapter 7 bankruptcy would probably not be the best decision. You may be forced  to sell your home and pay off  your existing debts if you do not qualify under  the Homestead exemption. Chapter 7 bankruptcy laws provide that if you have  equal to or less than the Homestead exemption or no
equity in your home, you can  retain the property if you continue to make timely payments.
 
If there is equity in your home but you have fallen behind  on your payments, Chapter 13 might be a wiser decision.  Chapter 13 will allow  you to continue to pay your mortgage and remain living in the home.  Keep in  mind that if your home is in default, you will have to make mortgage  payments  timely in addition to another payment on the arrears.
 
If you are unable to maintain your mortgage payment, the bank can foreclose on your home after your bankruptcy discharge.  As such, immediately listing your home for a short-sale is more than likely your best option.  Statistics show that lenders are less critical of a person who took
the  option of a short sale rather than a foreclosure.

FOR AN EXPERIENCED  LAWYER CALL US FOR A FREE CONSULTATION 

Written by Kalsoom Tremazi
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