Need Bankruptcy? 3 Ways To Keep Your Primary Home
Bankruptcy is always a difficult choice to make. But when you have a home with a mortgage, it's even more so. Likely, one of your biggest concerns is whether or not you can keep your home. The good news is that you do have several methods to do that. You also have alternatives that may be better for you. Here are three scenarios that may work for you.
1. Use the Homestead Exemption
The easiest way to save your primary home during bankruptcy is to use the state or federal exemptions in Chapter 7. Chapter 7, or liquidation, bankruptcy allows you to exempt a certain dollar value or type of asset from being used to pay off debts.
The federal exemption rules allow you to exempt up to $27,900 worth of real property under the homestead exemption. This may sound low to most homeowners, but keep in mind that this is the amount of equity — not the total value. Equity is the difference between what your property is worth and what you owe on the mortgage.
2. Choose Chapter 13 Bankruptcy
Liquidation bankruptcy is the fastest form of bankruptcy, but it's not your only choice. Chapter 13 is known as repayment plan bankruptcy. As its name suggests, it involves creating a payment plan that pays off as much of your unsecured debt as is possible within your monthly income. Payment plans last from three to five years.
The trade-off for paying more of your overall debt is that you can choose to reaffirm secured loans, such as your house or car. You must meet certain rules, such as being able to bring payments up to date along with continuing current payments.
3. Combine More Exemptions
Does your property have more than the state or federal allowable exemption? There may still be another way to save it.
In addition to the homestead exemption, you may be able to use a wildcard exemption or part of a different exemption. The wildcard exemption, if available in your state, allows you to use the value for any eligible asset or part of an asset. So if you can add this to your homestead exemption, the total may cover all your equity.
Where to Learn More
Could you protect your home even though you need the help of bankruptcy? The answer may surprise you. Start by learning more. Meet with a bankruptcy attorney to find out what options you have in your state.
