One of the biggest concerns homeowners who are considering bankruptcy may have is the security of their home in the process. When a party is considering bankruptcy, they are likely facing overwhelming debt and have many concerns related to their financial situation and financial future. In some instances, but not all, the party filing for bankruptcy is able to keep their home but they should be familiar with how that may be possible.
The bankruptcy process is designed to help struggling homeowners and consumers repay their debts but it is not designed to make them start from scratch. There are two primary types of personal bankruptcy including Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy is a liquidation bankruptcy options that allows the filing party to liquidate non-exempt assets to repay debts. Homestead exemptions at both the federal and state levels help to protect some of the value of a home. Chapter 13 bankruptcy, on the other hand, allows the filing party to reorganize and repay their debts.
Exemptions associated with a Chapter 7 bankruptcy may allow the filing party to keep their home and, likewise, the Chapter 13 bankruptcy process may provide a pathway for the filing party to keep their home. When the filing party has filed for Chapter 7 bankruptcy, the equity they have in their home will be considered to determine what is protected, or exempt, from the process. The amount of equity in the home will determine if it is exempt. Additionally, the Chapter 13 reorganization process may allow the filing party to include their mortgage which will allow the homeowner to get caught up and continue to repay their mortgage.
Keeping a house while struggling with debt can be a complex process so homeowners should consider their options and should also understand personal bankruptcy options available to help. The more they understand about the process, the better position they may be in to save their home.