Homes in Chapter 7 Bankruptcy

DuPage County Bankruptcy Attorneys Protecting Your Primary Residence

If you own a home and are considering filing for Chapter 7 bankruptcy, the dedicated attorneys at the Bankruptcy Center of Illinois can help. Chapter 7 bankruptcy is often used by people seeking to retain their exempt assets. Exemption provides a way to hold onto property during bankruptcy. One main factor affecting your ability to hold onto your residence is the amount of equity you have in your home. During bankruptcy, the trustee may attempt to sell your home in order to pay creditors if you have a lot of equity. Other factors also affect your ability to retain your home. Our DuPage County Chapter 7 bankruptcy lawyers clearly explain the process of filing for bankruptcy and how it impacts your property. Our goal is to provide compassionate and effective legal representation.

Homes in Chapter 7 Bankruptcy

After filing for Chapter 7 bankruptcy, there are different factors that affect whether you will be able to hold onto your home. Issues that may be assessed include whether your mortgage is current, the amount of equity you can protect through utilizing the homestead exemption, and the total amount of equity that remains in your home. In some cases, it may be appropriate to file for Chapter 13 bankruptcy instead of Chapter 7 if you intend to try and keep your home. A skilled attorney can advise you as to the specifics of your case.

A trustee holds all property in a bankruptcy estate after you file for Chapter 7 bankruptcy. Certain property may be exempt, especially that property considered reasonably necessary to maintain employment, as well as a home. Remaining assets will be sold in order to pay creditors.

It is important to be current with mortgage payments when you file for Chapter 7. Otherwise, you may lose your house. While an automatic stay does help temporarily halt foreclosure proceedings, a mortgage is a secured debt. This means that the lien in Chapter 7 bankruptcy cannot be wiped out. Instead, the lender has the right to foreclose when the automatic stay lifts.

Upon filing for bankruptcy, the lender may ask the court to lift the automatic stay. This would allow foreclosure proceedings to continue. If the trustee does not intend to sell the home, the court may allow the proceedings to continue.

Filing a Chapter 13 bankruptcy case is another option. This is likely a better fit for those individuals that want to keep their home. Chapter 13 bankruptcy provides a way for debtors to catch up on mortgage arrearages over time. There is also an option to pay creditors the value of nonexempt equity if they have more equity than is protected by the homestead exemption.

Defaults will not be cured by filing for bankruptcy. If you are facing foreclosure, filing Chapter 13 bankruptcy may be a better fit. You can catch up with any missed payments and get back on track with a repayment plan.

Homestead Exemption and Determining Equity in Homes

A bankruptcy exemption that specifically applies to homes is called the homestead exemption. This exemption protects equity in a principal residence, such as a house. When the exemption applies to the entire equity of your residence, the trustee cannot sell your home in a Chapter 7 bankruptcy case.

To determine the amount of equity in your home, the first step is to value your home. Subtract any outstanding mortgage balance from the home value. The equity is the amount left if the house were sold. If there is no equity, it may be an advantageous situation in the sense that trustees do not sell houses that do not have equity. If you do have equity, you need to apply a bankruptcy exemption to avoid losing the home.

If only a portion of your equity is protected by exemptions, then the house will be sold. The mortgage will be paid off and you will be provided the amount you are entitled to under the exemption. The remainder of sales proceeds will be used to pay creditors.

Consult a Dedicated DuPage County Attorney About Your Home in Chapter 7 Bankruptcy

The specifics of your case affect whether you will be able to keep your home after filing for Chapter 7 bankruptcy. At the Bankruptcy Center of Illinois, our DuPage County lawyers will utilize every exemption to protect your property, including your home. Our office can be reached by calling (773) 993-0024 or through our online form.