Perhaps you lost your job or had a medical emergency. Whatever the reason for financial difficulties, it is important to know that for many bankruptcy is an option that can help provide a fresh financial start. Those who are considering this process have many questions, including the impact of the process on their home.
Will I lose my home if I file for bankruptcy?
Though you can often protect your home when you file for relief through bankruptcy, the answer depends on the details of your situation. The type of bankruptcy you file — Chapter 7 or Chapter 13 — will impact your home. A Chapter 7 petition for relief through bankruptcy involves liquidating assets to pay off debts. However, you may be able to keep your home if it falls under the homestead exemption, which protects a certain amount of equity in your home. A Chapter 13 bankruptcy generally allows you to keep your home by restructuring your debts into a manageable repayment plan. It is particularly beneficial if you are behind on mortgage payments but have a steady income.
Steps to protect your home
There are steps you can take to help better ensure your home is protected while working through bankruptcy. These can include:
- Assess your equity: Determine if your home equity is within the homestead exemption limit.
- Consult a bankruptcy attorney: Legal counsel can help you to work through the complexities of bankruptcy and home protection and mitigate the risk of any surprises.
- Consider loan modification: This can help make your mortgage more affordable and prevent foreclosure.
- Weigh your options: There are situations where it may make more sense to move on and transition to a new home instead of trying to keep your current home. Consider all options before making your decision to better ensure you set yourself up for future success.
It is important to note that even the homestead exception is not automatic. Those who are filing for relief through bankruptcy must follow proper procedures to protect their home and other assets that are exempt from bankruptcy.
Working through bankruptcy in Essex County requires careful consideration of your financial situation. Protecting your home is possible with the right strategies and professional guidance.
