As a Charlotte bankruptcy attorney, one common fear I encounter related to filing bankruptcy is the fear of being able to keep your home in bankruptcy. Fortunately, for most clients, there is a bankruptcy option that allows them to keep their home and still receive the benefit of a discharge of numerous debts.
My Home In Chapter 7
In a Chapter 7 bankruptcy, you can keep your home provided you are current on your mortgage and the equity in your home does not exceed $35,000 for an individual, or $70,000 for a married couple. The equity is quite simply the fair market value of your home minus the balance of all mortgages on the home.
If the equity in your home does exceed the figures above, you can either ‘purchase’ that equity from the trustee by writing him or her a check for the amount you exceed the limits, or you can consider filing a Chapter 13, which would require that your payments in a Chapter 13 result in creditors getting at least the same amount of the excess, over the course of your re-payment plan.
The federal bankruptcy code allows you to keep your home in bankruptcy despite having equity, as a result of the Homestead Exemption in Section 522(d)1) of the bankruptcy code.
In order to exercise the Homestead Exemption, you or your dependent(s) must reside in the property as your primary residence. The Homestead Exemption extends the ability to keep your home in bankruptcy to mobile homes and houseboats.
My Home In Chapter 13
If you have too much equity in your home, or if you are behind on mortgage payments, HOA dues, or property taxes, Chapter 13 will set up a repayment schedule for the arrearages, over the course of the plan. For example, if you were behind on your mortgage payments by $6,000.00 and filed a Chapter 13 to prevent foreclosure, the Chapter 13 plan would include paying off the $6,000 debt over the course of the 36 or 60-month plan—whichever you were approved for.
If excess equity is the concern driving you to choose Chapter 13, the Chapter 13 plan requires the debtor to pay creditors as much over the course of the plan as the creditors would get in a theoretical Chapter 7. Your Charlotte bankruptcy attorney will run all of those numbers for you and submit them to the court, but essentially if you have $8,000 of excess equity in your home, then as long as the plan calls for $8,000 or more to go to creditors over the life of the plan, your creditors can’t complain.
When you complete your Chapter 13 plan, you have completely paid off the amount of the arrearages, and your mortgage is current. When the plan ends, you go back to your normal agreement with your mortgage lender. None of the terms of your mortgage change as a result.
What If I’m Behind On My Payments?
If you’re behind on your payments but would like to keep your home in bankruptcy, you should consider Chapter 13. A Chapter 13 payment plan incorporates your monthly mortgage payment in addition to the amount you’re behind on the day of filing. Over time, when making payments in your Chapter 13 plan, you stay current on your mortgage and make up the arrearages. At the conclusion of the plan, you still own your home while eliminating all other dischargeable debt.
Call An Attorney
If your home is in foreclosure, there is still time to file a Chapter 13 to stop the foreclosure and force a repayment plan on your lender. Chapter 13 is a great way to do it. If you have any questions about Chapter 13, foreclosure, or Chapter 7, call 704.749.7747 today. We’re here to help.