If your financial situation has deteriorated to the point that you are concerned about losing your house, you may be wondering if bankruptcy is an option for you. Could filing bankruptcy stop foreclosure proceedings? The truth is that bankruptcy can potentially save your home, but not always. Sometimes, it puts it at risk.
Understanding your personal bankruptcy options
There are two types of personal bankruptcy: Chapter 7 and Chapter 13. In Chapter 7, you essentially tell the court you don’t have enough income to repay your debt and want it eliminated. The process includes liquidating some of your material assets. In Chapter 13, you ask the court for an extended repayment plan in which you pay back some of your debt and the rest gets discharged.
Factors to consider if keeping your home is a priority
- In Chapter 7, part of the process includes having your property seized and sold to pay off your debts. However, federal law allows for an exemption equity rate of $23,675 in your home. In other words, if your home has equity lower than this exemption amount, the court cannot seize it. Pennsylvania, unlike some other states, does not have a separate state exemption protection for your home.
- In Chapter 13, timely repayment ensures that you won’t lose your property. Keep to your payment schedule, and you will keep your home.
Some people fear that filing bankruptcy means giving up their home, their car and many of their worldly possessions. As shown, this is simply not true. In fact, many people who file bankruptcy retain much of their property with the help of a qualified attorney.
For the individual who—for whatever reason—feels strongly about keeping their home, bankruptcy can be a viable option.