Filing bankruptcy is not the end of the world; instead it’s a positive way to end the overwhelming stress of financial obligations you are either struggling or unable to fulfill. The key to getting you through the process is finding the right attorney to help you along the way. When you do find the right attorney usually the first question asked is “how can I save my family home from bankruptcy”. The good news is that in many instances you can file bankruptcy and still retain your residence.
An excellent bankruptcy attorney will determine prior to filing whether or not your home will be at risk. Your attorney will also be able to advise you if there is a way to safeguard your home, if there is the chance of risk. If it is determined that your home can be protected in bankruptcy, your attorney can take proper bankruptcy exemptions. These exemptions are like shields that preserve certain pieces of property during bankruptcy. The exemptions will vary from state to state.
Below are listed 4 ways to save your home during bankruptcy:
- Determine whether you are filing Chapter 7 or Chapter 13 bankruptcy. Chapter 7 is known as the “liquidation” bankruptcy, in that most of your assets are liable to be remanded or turned over to the bankruptcy trustee on behalf of your creditors. Chapter 13 is “reorganization” of debt, where a payment plan is worked out in court to repay a portion of your debt over a 3 – 5 year period.
- When your filing has been determined your attorney will file an injunction with the court. Once the injunction is filed the law stops all your creditors, including your mortgage company, from taking any collection action against you. This includes harassing calls, repossessions and foreclosures.
- Your bankruptcy attorney will then contact the mortgage lender and advise that you would like to enter into a reaffirmation agreement regarding your home. The reaffirmation agreement is a contract between you and the lender. Through this agreement you can keep your home provided you maintain timely mortgage payments.
- If you have limited equity in your home you can still file bankruptcy and possibly still keep your home. In many cases 2nd loan mortgages or equity loans can be cancelled or stripped off the property. If you have a home with significant equity your attorney will advise you as to what direction is best for you.
By filing bankruptcy you can eliminate almost all debt, reduce stress and start over with a clean slate. Additionally, if a 2nd mortgage is stripped from your property this will allow you to quickly gain equity in your home. This is on of the most favorable outcomes of bankruptcy for homes with limited or no equity.