Life is unpredictable and can change in an instant – for better or worse. Life’s unexpected challenges may lead to unforeseen expenses, and paying housing costs during these moments can seem nearly impossible. When the bills pile up and you don’t know what to do, filing for bankruptcy may be an option you need to consider.
However, you might wonder if declaring bankruptcy will mean losing your home to foreclosure. Mariano & Coiro, P.C., understands the common concerns and questions surrounding bankruptcy and can analyze your personal situation to help determine if remaining in your home is possible, and if so, under what circumstances.
Keeping your home depends on these three things
Unfortunately, there is no single, solid answer or guideline to determine whether you’ll keep your home after filing for bankruptcy. Weighing variables such as the type of bankruptcy you file for, the market value of your home and your ability to pay your mortgage helps determine if staying in your home is a viable option. Delving deeper into these factors can help you weigh the costs of bankruptcy and the effect it could have on your living situation. Here are three questions you should ask before filing:
- Should I file Chapter 7 or Chapter 13 bankruptcy? Most people want to keep their home after filing for bankruptcy, assuming they can afford to do so. However, whether you file Chapter 7 or Chapter 13 bankruptcy affects the likelihood you’ll be able to do so. Both types have exemptions which allow you to move on and get a fresh start after bankruptcy. An exemption permits you to keep property below a certain monetary value, but the dollar amount varies between Chapter 7 and Chapter 13 bankruptcy. Chapter 13 exemptions are more lenient than those that come with Chapter 7. This ultimately means that a Chapter 13 bankruptcy case could signify a greater chance of keeping your home.
- How much is my house worth? The value of your house helps determine if you’re able to keep it. Fortunately, there’s still a chance it will remain in your possession if you file for Chapter 7 bankruptcy. For Chapter 7 bankruptcy, your home’s equity is the most important factor. Equity relates to how much of the house is truly yours. To calculate equity, you subtract any mortgages or home equity loans you may have from your property’s total market value. Subsequently, if you file for Chapter 7 bankruptcy and actually “own” very little of your home, there’s a better chance of you keeping it, assuming you are current with and continue to make the payments in the future. If you do not, your lender can always foreclose, as they are a secured creditor with a lien against your home.
- Can I pay my mortgage? Keeping your home throughout the bankruptcy process comes with stipulations for after the completion of your bankruptcy. After discharging your debts, you must still pay your monthly mortgage. However, if the price of your mortgage doesn’t fit into your budget, there’s a risk of the bank foreclosing your house. It may also be possible to pursue a “loan modification” with your lender, if they are willing to re-structure your loan.
Finding a bankruptcy attorney who understands your situation
Mariano & Coiro, P.C., want you to do what’s best for you and your financial situation. If keeping your house is a priority for you, we will make sure to explain what that will mean for you, both now and after you file. Contacting us today can start your bankruptcy process. We’re ready to discuss all possible options to get you a new start.