It is hard to avoid loans and other debts in the current economy. Borrowing has become an essential part of daily life. Since most loans have interest rates attached, it requires the borrower to have a proper payment plan and strategy to ensure they do not go into bankruptcy. Bankruptcy is the state of being unable to pay one’s debts. It is often used to describe the state of being very broke and unable to repay loans to creditors. When someone files for bankruptcy, they can no longer make payments on most types of debt, and the courts will settle everything. Here is what you need to know about keeping your house in case of bankruptcy.
Can You Keep Your House?
It is possible to keep your house during bankruptcy, depending on the specific circumstances of your case. If you can keep your house, it is essential to be aware that you will still be responsible for paying any mortgage payments and other debts related to your home. You may also be required to enter into a reorganization plan to keep your house, which may involve making payments over an extended period.
Factors That Determine if You Can Keep Your House After Going Bankrupt
1. Type of Bankruptcy
The type of bankruptcy you file can play a significant role in whether you can keep your house after going bankrupt. In general, there are two types of bankruptcy that individuals can file: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is known as a “liquidation” bankruptcy, where the individual’s assets are sold to pay off their debts. If you have a lot of equity in your home, you may have to sell it to pay off your debts through Chapter 7 bankruptcy.
However, if you file for Chapter 13 bankruptcy, you can keep your house and work out a repayment plan with your creditors. This is because Chapter 13 bankruptcy allows individuals to reorganize their debts and pay them off over some time rather than liquidating their assets.
2. Amount of Equity
If you have a significant amount of equity in your home, you may be able to keep it during bankruptcy. Equity refers to the difference between the value of your home and the amount you owe on your mortgage. If you have a high amount of equity, it may be more financially feasible for you to keep your house.
3. State Laws
Some states have laws that allow homeowners to keep their houses during bankruptcy. For example, states with homestead exemptions may allow you to keep your house if it is your primary residence and you have a certain amount of equity.
4. Payment Plan
If you can create a payment plan that shows you can pay off your debts over time, you may be able to keep your house during bankruptcy. This may involve entering into a reorganization plan or negotiating with your creditors.
5. Type of Debt
The type of debt you have may also affect your ability to keep your house during bankruptcy. If you have a mortgage on your home, it may be easier to keep your house compared to other types of debt, such as credit card debt or medical bills. This is because mortgages are typically secured debts, meaning the lender has a specific asset (your home) as collateral for the loan. In contrast, unsecured debts, such as credit card debts or medical bills, do not have collateral and may be more challenging to negotiate during bankruptcy.
What Are the Chances of Being Able To Keep Your House
The chances of being able to keep your house in bankruptcy depend on a variety of factors. However, If you have a significant amount of equity in your home and can demonstrate that you can make payments on a reorganization plan, your chances of keeping your house may be higher. But, if you have a high amount of debt and cannot make payments on your debts, your chances of keeping your house may be lower.
Can You Stop a Foreclosure Before You File for Bankruptcy?
In most cases, you cannot stop a foreclosure from starting before you file for bankruptcy. However, if you file for bankruptcy, it is possible to ask the lender to postpone the foreclosure until after your case is filed. If you can do this, it may allow you a little more time to sell your house or negotiate with your creditors.
Bankruptcy can be a difficult and stressful process for anyone to go through. However, it is essential to remember that it is not the end of the world and that options are available for those struggling with their finances. If you are on the verge of bankruptcy, it is essential to seek professional guidance and properly manage your income to ensure that you can keep your house and move forward with a fresh financial start. By taking the proper steps and being proactive about your financial situation, you can successfully navigate bankruptcy and come out on the other side.