Many homeowners in debt, from those who have fallen behind on mortgage payments to those who can no longer rely on equity in their house as a buffer against other forms of debt, wonder if they will still have a roof over their head after bankruptcy. The answer to this important question is quite complicated and depends on many factors:
- The type of bankruptcy that you file
- The amount of the homestead exemption in the state in which you are filing
- The value of equity in your house in relation
- The costs of selling the house
- The amount that you owe to creditors
Generally, if you are filing for a Chapter 13 repayment plan, you will probably be able to keep your house. If you are filing Chapter 7, the situation will be less clear.
What About the Homestead Exemption?
Homestead exemptions apply to Chapter 7 bankruptcy claims. Each state sets a limit for the amount of equity in a house that a debtor can keep during bankruptcy. Some states do not have any limit at all. In Florida, for example, the exemption is unlimited, so long as it’s not larger than 1/2 acre inside a municipality or 160 connected outside of a municipality.
In practice, this means that when an individual has more equity in a house than the state’s exemption, then the house may be sold off by the bankruptcy trustee, with non-exempt proceeds distributed to creditors. Sometimes, however, the costs of selling a house may be prohibitive, even when the equity in house is beyond the exemption. The situation varies from case to case. If you are unsure, experienced Orlando Bankruptcy Lawyers or Kissimmee Bankruptcy Attorneys can help.
Your House in a Chapter 13 Claim
If you have fallen behind on mortgage payments and are at risk of foreclosure, filing for Chapter 13 could be a way to keep your house. In a Chapter 13 bankruptcy, you must establish a debt repayment plan that is approved by your creditors. The repayment plan can last between three and five years and can provide you with the time that you need to stabilize your situation. For more information about how to keep your house with Chapter 13 in Florida, consider contacting knowledgeable Sanford Bankruptcy Attorneys.
This information has been provided by the Law Offices of Walter J. Benenati, bankruptcy attorney, 105 E. Robinson Street, Suite 302, Orlando, Florida 32801