04 Oct A House May Be Exempt In Bankruptcy, But You Don’t Get A Free House In Bankruptcy
Bankruptcy doesn’t always mean you are going to lose your house, and in fact many people find filing Chapter 7 or Chapter 13 actually helps them keep their home. You will have to keep making your mortgage payments if you have a mortgage and want to keep your house after filing for bankruptcy.
I have had a number of phone calls recently from people who can’t afford their mortgage payments. They were under the impression that by filing bankruptcy, they could keep their home, and the mortgage would be written off in bankruptcy. Pamela Stewart, a bankruptcy lawyer from Texas also noticed people calling her about this. Unfortunately, this is not how bankruptcy works. To keep your home, you have to pay the mortgage(s) owed.
Exemptions in bankruptcy determine how much equity you get to protect from your creditors in bankruptcy. It is based upon the value of your property, not necessarily the total value but how much you would get if you sold the property, after paying off any loans secured by the property. For example, the equity in your house is calculated on the difference between what your house is worth, and the balance of your mortgage(s).
Chapter 7 bankruptcy discharges (legally releases you) from most unsecured debts and you get to keep your exempt property. However if you have a debt secured with your home and you want to keep the home, you are normally going to have to pay the loan(s) in full to keep it. The mortgage lien is not released from your house.
Chapter 13 may be able to protect your home if you have more equity than is exempt. Chapter 13 can help you catch up missed mortgage payments. But most residential home mortgages remain the only kind of secured debt that is not able to be modified under bankruptcy laws. However, under some circumstances, you might be able to write off a second or third mortgage if there is no equity to support those loans, but you need to talk to an experienced bankruptcy lawyer to find out if that applies to your case.
by Susanne Robicsek Charlotte NC Bankruptcy Lawyer
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