Losing a home in bankruptcy is a traumatic experience, but it doesn’t happen every time in every bankruptcy case. You may wish to speak with a real estate lawyer to discuss your options for bankruptcy, as well as to understand the likelihood of losing your house after filing for bankruptcy.
The good news is that the government can’t take absolutely everything you own. When you file for bankruptcy, there are some exemptions, which vary depending on the type of bankruptcy you file and the state in which you live.
Illinois, for example, has its own set of exemptions that will determine what property you will get to keep and what you may have to give up in bankruptcy. One exemption is called the Personal Property exemption, and it allows you to keep a motor vehicle valued up to $2,400, as well as personal items like clothing, books for school, health aids, and family photographs.
Your Choice of Bankruptcy Filing May Influence Whether You Keep Your Home
There are two types of bankruptcy that your lawyer will explain to you before you make the final decision to file for bankruptcy. The first is Chapter 7 bankruptcy, which usually requires the liquidation of your assets. The second is Chapter 13 bankruptcy, which features a payment plan designed to get you in good financial footing again after a payment plan of several years.
You also have other responsibilities no matter which type of bankruptcy you file. The Federal Trade Commission shares:
“If you plan to file for bankruptcy protection, you must get credit counseling from a government-approved organization within 180 days before you file. You also have to complete a debtor education course before your debts can be discharged.”
You can actually keep your home even if you file for Chapter 7 bankruptcy, but you must meet two conditions. First, you must be current on your mortgage when you file. You must also live in a state that allows you to exempt the equity in your home. If you’ve fallen behind on your mortgage payments when you file for Chapter 7 bankruptcy, the bank may foreclose on the house.
It’s important to consider, too, that the bankruptcy trustee assigned to your case has the power to sell your home under Chapter 7 bankruptcy and use the proceeds to pay your creditors.
Your lawyer may suggest that you file for Chapter 13 bankruptcy if you want to keep your home and you’ve fallen behind on mortgage payments. In Chapter 13 bankruptcy, the Court will place you on a payment plan. If you successfully complete the payment plan, your lender can’t initiate foreclosure proceedings.
Understanding Bankruptcy Before You File
Meeting with a lawyer is the most important step you can take in making the decision to file for bankruptcy. There are other options available to you, and your lawyer can examine your circumstances and tell you whether the bankruptcy process would benefit you or whether something like debt consolidation would offer you a better result.
In addition to meeting with a lawyer, you may wish to explore the details on bankruptcy published by the website for the Illinois attorney general. Here’s how the state describes Chapter 7 bankruptcy, which is described as a liquidation:
“Chapter 7 is appropriate for individuals and businesses of any size. Companies that want to go completely out of business or liquidate should use Chapter 7.”
This is what the Illinois government has to say about Chapter 13 bankruptcy:
“Chapter 13 is available to small businesses operated by a sole proprietor or individuals with a regular income who owe less than $807,750 in secured debt (debt for which there is collateral, like a house) or less than $269,250 in unsecured debt. Wage earner plans give debtors the chance to continue operation and get back on their feet.”
The state also offers Chapter 11 bankruptcy, which is described as a reorganization; however, this option for bankruptcy is only used by individuals who have significant debts or businesses that wish to retain control over their assets.
Yes, You Can Keep Your House in Bankruptcy
While there are some instances where keeping your home would prove quite unlikely, there are instances where you can keep your home, as well as your car. If you think about it, keeping your car can help you regain your financial footing by providing you with transportation to your job.
However, it’s important to consider that there might be other debts you owe that won’t go away with bankruptcy and that those financial responsibilities will continue to make it difficult to make your mortgage payments on time. The Washington Post shares:
“It’s also worth noting that certain debts, such as student loans, tax debts and child support obligations, cannot typically be discharged through bankruptcy. And bankruptcy also can stay on a consumer’s credit report for up to 10 years, making it more difficult for them to qualify for new loans and potentially hurting them in other situations where their credit may come into play.”
If you have student loans from the federal government that require significant payments, you’ll still have to pay for those loans even after you file for bankruptcy.
Do You Need Assistance With Filing for Bankruptcy?
If you’re thinking about filing for bankruptcy and you’re afraid of losing your home, contact Suburban Legal Group to set up a free consultation. You have options to regain your financial health, whether that means filing for bankruptcy, seeking debt consolidation, or selling your home. Let us help you determine whether bankruptcy is right for you and whether it may help you keep your home. Contact us for a free legal consultation.
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.