Not to worry; Mark could talk to his trustee about filing a consumer proposal. If the creditors agree, Mark can keep his house and avoid bankruptcy. The point of these stories is that you do not automatically have to lose your house just because you filed bankruptcy. You have options to keep your home as long as you are able to pay your mortgage payments on time. Your Licensed Insolvency Trustee will advise you to get an appraisal on your house as part of the assessment process in order to determine just how much equity there might be.
In this case we look to the next option, which is making a proposal to your creditors. One of the most popular ways to keep a home with significant equity value when you are in financial trouble is to file a consumer proposal.
A proposal to your creditors would include a payout plan for any equity value in your home. The difference between a bankruptcy option and a consumer proposal is that you can spread those payments over a longer period of time.
By eliminating unsecured debt, bankruptcy can lower your debt payments enough each month that meeting monthly mortgage payments is much easier. However if you are behind on your mortgage payments and determine that even after filing bankruptcy you still cannot afford your house, you can opt to sell your home as part of your personal bankruptcy.
Any shortfall will be processed as an unsecured creditor claim, any equity will be realized by the bankruptcy trustee to be distributed to your creditors. Worrying about your home and your family is natural. Luckily, most states allow you to protect a certain amount of equity in your home discussed below.
Learn about releasing liens in bankruptcy. Exemptions are what allow you to keep a certain amount of assets in Chapter 7 bankruptcy. But how much property you can protect will depend on the exemption laws of your state.
Most states have a homestead exemption specifically designed to protect a certain amount of equity in your principal residence. If you can entirely exempt the equity in your home, a Chapter 7 trustee can't sell it to pay your creditors. However, homestead exemption amounts differ from state to state. Check your state's exemption laws or talk to a bankruptcy attorney in your area.
You'll want to be sure you can exempt all of your equity before filing your case. It is the amount of money you would get if you sold your home after anything secured on it, for example mortgages or loans, have been taken off. It is different to the legal title to the property, which is held by whoever owns it.
If you're the sole owner , your beneficial interest is normally the whole value of the property, minus anything secured on it. If you own the property jointly , the amount of your beneficial interest is normally this amount shared equally between you and the other owners. It's important to remember that you can't just sign over your share of your home to someone else to avoid it being sold. This is a bankruptcy offence.
If the official receiver finds out you've done this, you could have a bankruptcy restrictions order made against you, be fined, or even sent to prison. If you want to sell your share, you need to do it at market value. If your home is in negative equity, then you may be able to keep it. At two years and three months after the bankruptcy order is made, the situation will be reviewed.
The official receiver or trustee has three years to take action in relation to your home. Your interest in your home will become yours again if they haven't done any of the following within three years from the date your bankruptcy order was made:. If you rent your home, it's unlikely you'll lose it by going bankrupt. However, there are certain situations where your home may be at risk, including:. If you risk being made homeless because of bankruptcy or it's already happened to you, you should contact your local authority as soon as possible.
They will consider your circumstances to see if you're eligible for help with re-housing. If you've sold your home in a bid to avoid going bankrupt, the local authority may not help you with alternative housing, as it may decide you're intentionally homeless. Why filing won't cure a default. Chapter 7 bankruptcy doesn't provide a way for you to catch up on the overdue payments. This presents a problem because a mortgage is a secured debt , and you can't wipe out the lien in Chapter 7 bankruptcy.
The lender can foreclose after the automatic stay lifts, and you'll lose the house. What will happen if you file. The lender will either ask the court to lift the automatic stay to allow foreclosure proceedings to continue which the court will likely grant if the trustee doesn't plan to sell the home or wait until the bankruptcy ends, proceed with foreclosure, and then sell the house at auction. Chapter 13 bankruptcy can help. If you're behind and want to keep your home, the better option is to file a Chapter 13 case.
Unlike a Chapter 7 bankruptcy, it has a provision that allows you to catch up on mortgage arrearages over the course of a three- to five-year repayment plan. Also, if you have more equity than you can protect with a homestead exemption more below , you can pay your creditors the value of the nonexempt equity in the plan, as well. Talk to a Bankruptcy Lawyer Need professional help? Start here. Practice Area Please select Zip Code.
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