Can You Keep Your House In Chapter 7 – Your house is usually one of the most important places for you. Maybe you fought long and hard to get it, and maybe you don’t want to give up the eternal memories you forged there. However, all that great stuff can be at risk when creditors try to take it away from you. Unfortunately, you could lose your home to creditors if you take on too much debt. However, there are ways to protect your home from your creditors during bankruptcy proceedings. Pennsylvania bankruptcy attorneys Young, Marr, Mallis & Associates understand that people worry about losing their homes if they file for bankruptcy.
When determining whether you can keep your home if you file for bankruptcy, there are two factors to consider. First, are your mortgages up to date. If they are, then your home should be safe. If you file Chapter 7, the bankruptcy trustee could take over your home and sell it to pay your creditors. However, there are ways to protect your home under federal and state law. Second, if you fall behind on your mortgage payments, you may be able to recover what you owe in a Chapter 13 bankruptcy.
Can You Keep Your House In Chapter 7
However, this is only a “short” answer. Bankruptcy law is complicated, so the actual answer will depend on your specific circumstances. Below, our Philadelphia bankruptcy attorneys take a closer look at your home and bankruptcy. If you have any questions about bankruptcy and your home, call (215) 701-6519.
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Every year, thousands of Americans file for bankruptcy due to financial difficulties. Many times, through no fault of their own, homeowners find themselves saddled with excess debt, making it difficult to meet their monthly obligations. People may have to choose between buying groceries for the week and paying their mortgage. Because of this, many debtors turn to bankruptcy to deal with their financial difficulties. In some cases, bankruptcy can help you protect your home.
Generally, if you have credit card debt, it is considered “unsecured debt.” This means that your credit card debt is not secured by collateral, such as a home. Therefore, your credit card company can’t immediately go against assets like your home when they try to collect on your debt.
However, creditors will often bring a debt collection action. When the creditor is successful, and they often are, if they can prove that you owe and filed their claim within the statute of limitations, they will get a judgment. In Pennsylvania, a collection judgment creates a lien on your home. Now that unsecured debt is secured by your home. Technically, the creditor could foreclose on the property to collect the debt. However, since the mortgage, foreclosure, and court costs would have to be paid first, the card company has no financial incentive for a sheriff’s sale. Regardless, you now have a lien on your home that you will have to fulfill when the property is sold. The judgment lien will also continue to accrue interest.
Things can be very different when you have secured debt. Unlike unsecured debt, your mortgage is secured by collateral. In other words, the bank is specifically authorized to claim your house if you default on the mortgage. Banks will often enforce this lien against your home regardless of your financial situation. One way your mortgagor will do this is through a Pennsylvania mortgage foreclosure.
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Foreclosure is a legal process by which your creditor can take ownership of your home, sell it, and pay off your debt with the proceeds. If your home is foreclosed and sold, you may be forced to move, which can add additional stress to an already difficult situation. You may be able to protect assets such as your home and car through bankruptcy.
Fortunately, you can often protect your home by filing for bankruptcy. There is a common idea that bankruptcy is some kind of “trap” or that bankruptcy will take everything from you. However, nothing could be further from the truth.
The very purpose of the Bankruptcy Code is to help debtors in restructuring and managing excess debt in order to avoid financial disaster and help creditors to pay off. Over the years, bankruptcy has enabled economic recovery for millions of Americans.
Furthermore, the bankruptcy process has allowed many people to protect their homes from foreclosure by their creditors. You may be wondering how you can protect your assets from foreclosure by filing for bankruptcy in Pennsylvania. Fortunately, bankruptcy laws contain a number of protections that help debtors get back what they owe.
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As soon as you file for bankruptcy, you get the protection provided by the “automatic termination.” An automatic stay is a legal mechanism that prevents your creditors from engaging in debt collection or foreclosure actions while your bankruptcy case is pending. The effect of this protection is immediate, and your creditors will not be allowed to foreclose on your home starting from the moment the stay is activated.
As a debtor, it’s easy to feel lost and hopeless, especially when going through bankruptcy. Bankruptcy can help you get rid of debt or restructure your finances through a plan, depending on the chapter under which you filed. If you want to protect your house, this can affect which chapter you choose.
Chapter 7, or “liquidation bankruptcy,” is a process in which a debtor can discharge most or all of their unsecured debt. As a reminder, unsecured debt includes things like credit card debt that has no collateral, but does not include secured debt like a mortgage. All potential applicants must go through a qualification process before they can file for Chapter 7.
For example, you will have to go through what is known as a. “means test.” A means test will compare your finances to your state’s median income to see if you have enough disposable income to pay off your debt. If your income falls below your state’s median income, you may qualify for Chapter 7. However, if you are above your state’s median income, you cannot use Chapter 7, but you may qualify under another chapter instead.
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Chapter 7 is designed to eliminate debt. However, if you are behind on your mortgage and facing a sheriff’s sale, there are no mechanisms in Chapter 7 to resolve your mortgage arrears. Although an automatic foreclosure will stop all legal proceedings, including a sheriff’s sale, your mortgage lender will likely file a “petition for relief from foreclosure.” This petition is a request to the court to remove the stay protection against your home, allowing the mortgage company to proceed with the foreclosure. If you are behind on your mortgage payments and have filed for Chapter 7, the petition will likely be approved.
On the other hand, what if you are currently paying your mortgage and just trying to pay off unsecured debt? The answer depends on the equity you have in your home. Equity is the amount of money you would receive after selling the property and paying off the mortgage debt and all closing costs. Under federal exemptions, you can protect $25,150 in equity. If the equity in your home is more than this amount, the trustee could sell the property, pay all expenses, give you $25,150 and use the remaining proceeds to pay your creditors. If you have significant equity in your property, you would need to file for Chapter 13 or find an option other than bankruptcy.
You can also file for Chapter 13 bankruptcy to be placed on an employee benefits plan. Through this process, debtors have the opportunity to design a repayment plan of 3 to 5 years with their creditors. Debtors must comply with all conditions included in the repayment plan in order to have their debt discharged.
If you are behind on your mortgage and want to keep your home, Chapter 13 is the type of bankruptcy you want to file. Here’s how it would work.
Can You Keep Your House If You File Bankruptcy?
You’re $50,000 behind on your mortgage, and your mortgage lender has filed a foreclosure lawsuit. Before your lender gets a judgment, you will hire our Philadelphia bankruptcy attorneys to file a Chapter 13 case. When preparing a case for filing, a bankruptcy plan is created. This plan proposes paying $50,000 over five years. In addition to the mortgage debt, the bankruptcy plan will also pay the trustee’s fee and the balance of our fees. On September 1, your case was filed.
After your bankruptcy is filed, you are responsible for two payments: the regular mortgage payment and the Chapter 13 bankruptcy plan payment. In this case, both are due on October 1st. Therefore, you must send a payment to your mortgage company and the Chapter 13 trustee within 30 days. If you do not pay your mortgage company, a request for relief will be filed. If you fail to pay the trustee, a motion will be filed to dismiss your case. To keep your house, you must continue making both payments.
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