Can You Keep Your Home When You File? Is It Easier with Chapter 7 or Chapter 13?
If you’re like many Americans, struggling financially because of the coronavirus pandemic, you may be considering bankruptcy as a way to get a fresh financial start. Your biggest concern, though, could be whether you’ll be able to keep your house if you file for bankruptcy. Let’s look at how a bankruptcy filing might help you accomplish both objectives.
The Automatic Stay
The first way that filing for bankruptcy can help you keep your residence is by operation of the automatic stay. When you file for protection, whether under Chapter 7 or Chapter 13, a “stay” automatically goes into effect and prevents creditors from calling, writing, filing legal action, or pursuing existing claims (such as foreclosure proceedings) in an attempt to collect the debt. At least initially, the stay remains in effect even if you cannot make your monthly mortgage payments. Accordingly, it allows you to keep your house as you determine whether you qualify to file for Chapter 7 liquidation or Chapter 13 reorganization.
Can You Keep Your Home When You File Under Chapter 7?
Chapter 7 allows you to permanently discharge certain debts in exchange for the transfer of assets to the bankruptcy court. (The assets are sold, with the proceeds going to your creditors.) You have the right to exempt certain property from transfer, including some of the equity in your residence. Therefore, as a general rule, the only way to keep your home in a Chapter 7 bankruptcy is if your exemption is high enough to protect your equity. If your equity in the property exceeds the exemption, the court will look to that excess equity to satisfy your creditors.
Keeping Your Home in a Chapter 13 Filing
One of the principal attractions of Chapter 13 is that it allows you to keep property by negotiating new payment arrangements with your creditors. However, you must demonstrate to the court that you’ll have the financial resources to make your house payments over the reorganization period (three to five years). If you can’t, then you may have to file Chapter 7 and relinquish your home.
Contact an Experienced Rockwall, Texas, Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. I am currently communicating with clients by phone, text message, or videoconference. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.
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