As an Asheville bankruptcy lawyer, I talk about options for homes with people who are facing difficult financial circumstances. Generally, if you want to keep your home, the most important thing moving forward is your ability to continue making the mortgage payments.
Chapter 7 v. Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy case, the bankruptcy trustee rarely sells property for the benefit of your creditors. Instead, money flows to creditors from the monthly payment you make to the trustee’s office. So long as you continue making payments in a confirmed Chapter 13 plan, you have a right to keep your home. In fact, if you are behind on mortgage payments for a home you wish to keep, Chapter 13 offers a potential solution.
In a Chapter 7 bankruptcy case, the bankruptcy trustee liquidates non-exempt equity for the benefit of creditors. You are allowed to keep your home so long as you are able to exempt the equity that you have in the home. In North Carolina, the exemption statute allows for $35,000 per spouse ($70,000 for a married couple) of home equity to be protected from liquidation by a trustee. If the value of your home, reduced by the amount owed on your mortgage, is below the exemption limits, filing a Chapter 7 case will not impact your ability to keep your home.
Can I afford the home?
The most important question to ask yourself is whether the mortgage payments fit within your budget. Frequently, a Chapter 7 case can help save a home by eliminating other debts which have been constraining a household budget (credit cards, personal loans, etc.). Other times, a Chapter 7 case can eliminate mortgage obligations for clients who can no longer afford their mortgage payment. Chapter 13 can help save equity for a home after a mortgage has become delinquent. In either type of case, I always review household budgets with clients so that they can make the best choice regarding their home.
If you would like to understand options for your home in bankruptcy, and outside of bankruptcy, I would be pleased to speak with you during a free, initial bankruptcy consultation.
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