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.
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Written by Kalsoom Tremazi