Filing for bankruptcy can be a difficult decision, and one of the most important questions to consider is whether you will be able to keep your house. The answer depends on the type of bankruptcy you file, as well as the laws in your state. In this article, we'll explore the different types of bankruptcy and how they affect your ability to keep your home.The most common type of bankruptcy is Chapter 7, which is a liquidation bankruptcy. In this type of bankruptcy, all of your non-exempt assets are sold off to pay off your creditors.
In most states, your home is exempt from liquidation, so you can usually keep it. However, if you have a lot of equity in your home, the trustee may decide to sell it in order to pay off your creditors.Chapter 13 bankruptcy is a reorganization bankruptcy. In this type of bankruptcy, you create a repayment plan that allows you to pay off some or all of your debts over a three- to five-year period. During this time, you can keep your home as long as you make all of your payments on time.
If you fail to make payments, the trustee can order the sale of your home.The laws regarding bankruptcy vary from state to state. Some states have homestead exemptions that allow you to keep a certain amount of equity in your home even if you file for Chapter 7 bankruptcy. Other states have laws that allow you to keep more equity in your home if you file for Chapter 13 bankruptcy. It's important to research the laws in your state before filing for bankruptcy.In addition to state laws, there are also federal laws that affect how much equity you can keep in your home when filing for bankruptcy.
The federal homestead exemption allows you to keep up to $25,000 in equity in your home if you file for Chapter 7 bankruptcy. If you file for Chapter 13 bankruptcy, the federal homestead exemption allows you to keep up to $125,000 in equity in your home.It's important to note that if you have a second mortgage or a home equity loan on your home, these loans are not covered by the homestead exemption. If you have these types of loans and file for Chapter 7 bankruptcy, the trustee may decide to sell your home in order to pay off these loans.If you're considering filing for bankruptcy and want to keep your house, it's important to understand the laws in your state and how they affect your ability to do so. It's also important to understand the federal laws regarding homestead exemptions and how they apply to your situation.
An experienced bankruptcy attorney can help you understand the laws and determine whether filing for bankruptcy is right for you.