Can I Keep My Home After Filing Bankruptcy?
If you wonder, “Can I Keep My Home After Filing Bankruptcy?” attorneys from Bournakis & Mitchell, P.C. can help. Contact us for additional resources and advice.
Will I Lose My Home If I File for Bankruptcy?
The decision to file for bankruptcy, in many cases, is made as a last resort for those dealing with significant debt loads, creditor harassment, or facing foreclosure. The goal is to obtain a fresh start financially.
However, as much as a successful bankruptcy brings debt relief, it could also involve the loss of assets that are used to settle some of the outstanding debts. If you’re a homeowner considering filing for bankruptcy, you’ll likely be concerned about whether those assets would include your home.
Filing for bankruptcy does not necessarily mean that you’ll become homeless. However, whether or not you get to keep your home after filing for bankruptcy depends on several factors, including the type of bankruptcy you’re filing for and whether you qualify for bankruptcy exemptions in your state.
Keep reading to learn more about the appropriate types of bankruptcy for individuals under US bankruptcy laws, the bankruptcy home exemption in Georgia, and how a bankruptcy attorney can help you.
Types of Bankruptcy for Individuals and Their Effects on Your Home and Assets
There are several types of bankruptcy under various chapters of the United States Bankruptcy Code, including Chapter 7, Chapter 11, and Chapter 13. The purpose for each one and their effect on your assets after the bankruptcy is different.
However, the discussion here is focused on bankruptcy under Chapter 13 and Chapter 7, as their processes are more suited for individuals.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy filing involves the liquidation of the debtor’s assets. Here, the official bankruptcy trustee collects and sells all the debtor’s non-exempt assets. The proceeds of the sale are then used to settle the outstanding debts.
Chapter 7 bankruptcy thus involves significant loss of the debtor’s assets. Unless you qualify for the Georgia bankruptcy exemptions, which we shall discuss subsequently, you could lose your home and other assets if you opt for this form of bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is meant for individuals who have a regular monthly income. It allows those qualified to adjust or reorganize their debts and make their loan payments through a long-term repayment plan. At the end of the repayment period, any other unsecured debt left is discharged by the bankruptcy court, where your case is heard.
Filing for bankruptcy under Chapter 13 has several advantages, including that it allows you to keep your home and your assets while you work to catch up with your due debt payments. Your home and assets will only be at risk if you default on your repayment plan.
Bankruptcy Home Exemption Under the Georgia Code
Regardless of the form of bankruptcy you choose, the Georgia Code has certain exemptions for property, including homes, during bankruptcy proceedings.
According to the law, the debtor’s interest in their home not exceeding the value of $21,500 is exempt from liquidation in bankruptcy. The figure climbs to $43,000 if a married couple jointly owns the property.
What this means is that if the value of your home or the amount of your equity if you have a subsisting mortgage does not exceed the above amounts, your home is most likely safe from bankruptcy. Creditors or your bankruptcy trustee cannot sell or force you to sell your home to settle your debts.
This exemption is significant if you’re filing for Chapter 7 bankruptcy, where there is a real likelihood that your home will be lost. While the law doesn’t exclude Chapter 13 Bankruptcy from the application of this exemption, you might not need to rely on it since your home is not in jeopardy under a Chapter 13 bankruptcy.
What Happens If Your Home Equity Is Over the Exempt Amount?
If your home equity exceeds the exempt amount under Georgia law, that could affect the safety of your home, especially under a Chapter 7 bankruptcy. In that case, the bankruptcy trustee could sell your home and use the amount realized to pay off your creditors after handing you the exempt sum of $21,500 or $43,000.
Will Filing for Bankruptcy Affect My Home Mortgage?
Whether or not bankruptcy would affect your home mortgage also depends on the form of bankruptcy you apply for.
A mortgage indicates a secured debt obligation that must be serviced with the agreed periodic payments within the stipulated time.
Many homes are purchased via home equity loans or mortgage debt financing, in which case the home itself serves as collateral for the mortgage loan. Failure to make the appropriate payment entitles the mortgage lender or company to foreclose on the property to recover the outstanding debt.
If you have missed payments on your mortgage and you file for a Chapter 7 bankruptcy, that could help to get your mortgage debt discharged. However, bankruptcy does not extinguish the lien attached to your home as collateral.
So while you’re under no obligation to continue servicing the mortgage debt, you could lose your home if the mortgagee decides to exercise their rights under the lien.
You may have options to preserve your home /mortgage following a Chapter 7 bankruptcy under bankruptcy law. However, you’d need to consult an experienced bankruptcy attorney to find that out.
In contrast, if you file for bankruptcy under Chapter 13, you do not need to worry about losing your home to the mortgage company. You can incorporate any outstanding debt and future mortgage payments into your repayment plan.
Chapter 13 bankruptcy is generally geared towards the preservation of your assets and so if preserving your home and other assets is a concern, consider opting for this procedure.
However, before you decide, it is essential to seek professional help from a bankruptcy attorney as you explore your options.
How Bankruptcy Attorneys Can Help You Protect Your Home
Protecting your place of residence is important so that you don’t end up on the streets at the end of the bankruptcy process. Bankruptcy lawyers can evaluate your situation and help you identify the ideal course of action to offer you debt relief without losing your home.
They can also help you determine your eligibility for each form of bankruptcy and prepare the paperwork necessary to kickstart the bankruptcy process.
Going through serious debt is stressful, and you need all the help and support you get. Consider working with an attorney who has the required experience to provide the assistance and legal guidance you require as you go through such a critical phase in your finances.
If you have further questions about filing for bankruptcy, preserving your assets, and achieving freedom from creditors, you can contact us at Bournakis & Mitchell, P.C. We are committed to helping people like you across Northwest Georgia live debt free amid financial hardship. Contact us today, and let us help you resolve your financial woes.