As an Asheville bankruptcy attorney, one of my functions is to help clients estimate the correct values for the property they own. By doing this well, we can permanently protect assets from the reach of the client’s creditors. This process has recently become more complicated for folks living near Asheville who have equity in their homes, want to file a Chapter 7 bankruptcy case to eliminate debt, but have not made the move to get their case filed yet.
Rising Home Prices in Western North Carolina
Just last year, I confidently filed Chapter 7 bankruptcy cases in Buncombe County, North Carolina using the tax values established by the county. Home values took a big hit in 2009 with market prices falling below the tax appraisal in most cases. The issue is that home values are rising which increases the amount of equity clients own in their homes. Today, I might encourage those same clients who used their tax bill to value their home last year, to instead reach out to a realtor for a (free) broker’s price opinion. We want to be sure their house is protected.
Exemptions are a way for folks to protect property they own. In North Carolina, our homestead exemption is $35,000 for a single filer or $70,000 for a married couple. This means if you own a house worth $200,000, and owe $130,000 on a mortgage, you and your spouse can likely protect all of the equity you own together in your home. When prices are rising, exemption limits become an issue when the home value rises to $250,000 in the same hypothetical. In that scenario, we likely would not have enough exemption to cover their equity.
Chapter 13 can be a solution for people who own important assets valued over and above the exemption limits. In this type of bankruptcy case, all a client’s property is protected regardless of the value. The non-exempt equity a client owns helps dictate the required amount a client is required to pay back to creditors in a monthly payment lasting 3 to 5 years. Many times, a small amount of non-exempt home equity does not get in the way of a client making the minimum Chapter 13 payment allowed in Western North Carolina. That amount is 10% to unsecured creditors, and is a good solution for many people.
In a market with rising home values, clients who procrastinate may lose the ability to protect all of their equity in a Chapter 7 bankruptcy case. If you are ready to figure out your immediate bankruptcy options, and live in Western North Carolina, contact me for a free, initial bankruptcy consultation.
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