A common concern for consumers who are contemplating bankruptcy is whether or not they will lose their home. During Chapter 7 bankruptcy, several issues can arise. But, typically, if there is equity that is exempt and you can continue making your payments, you may not lose your home.
Chapter 13 Bankruptcy and Your Home
If you file under Chapter 13, you can keep all property. This is because you enter into a payment plan with the courts, and your assets are overseen by a court-appointed trustee. You must make the monthly payments in full and on time to stay in accordance with the court agreement. Typically, these plans take three to five years, but once the payment plan is complete, you are out of bankruptcy and your property is yours.
Chapter 7 Bankruptcy and Your Home
If you file for Chapter 7, you do not have to repay your debts. Instead, debts are discharged through the courts, but you are required to give up your property that is not exempt. In the state of Washington, a trustee collects all of your assets that are not exempt, and sells them. You can keep certain secured debts, such as your furniture, home, and car. But, you must reaffirm those debts. That requires you to sign a “Reaffirmation Agreement.” If you do sign this agreement, you cannot file bankruptcy on those items for eight years, and you are required to meet the payment obligations just as you were prior to filing for bankruptcy.
In this situation, homeowners should first consider if they can afford their mortgage payment. Also, you must repay any back-owed payments before you can reaffirm the debt; that is, the debt must be current. So, if you are three months past-due on your mortgage, you must first make the three months’ worth of payments, and then sign the reaffirmation agreement with the lender.
Your homestead exemption protects your home from creditors other than your mortgage company. After you reaffirm your mortgage, your homestead protects your equity. If your home has equity, and that equity exceeds your exemptions, then the trustee can elect to liquidate the home and distribute the proceeds. Therefore, you will want to have your bankruptcy attorney assess your equity situation. You are, however, entitled to the value of your exemption in that asset, as a cash payment, after it is liquidated.
Speak with a Bankruptcy Attorney to Explore Your Options and Save Your Home
Do not lose your family home; instead, speak with a Washington bankruptcy attorney. The team at Hames, Anderson, Whitlow & O’Leary Attorneys at Law can help you with your bankruptcy case. We will assess your current financial situation and exemptions, so that you can possibly keep your family home and still erase debt. Call now for a no-obligation consultation at 509-586-7797 or fill out our online contact form with your questions.