The Effects Of Bankruptcy On The House You Live In
by Veeti Lepisto
There are many differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy, including what can happen to the house you own. If you really want to keep the house you live in, you might be able to with either type of bankruptcy, but there is also a chance you could lose it. Here are three factors that influence the way bankruptcy affects the house you live in.
The Equity In The House
When you file Chapter 7 bankruptcy, the trustee will typically allow you to keep your house if you have very little equity in it. The trustee will use a calculation to determine the answer to this. If you do not have equity in the home, it would be useless for the trustee to take the home from you. If the trustee did and sold the house, there would be nothing left to pay to your creditors.
With Chapter 13, the amount of equity in your home does not affect your ability to file or keep your house. You can keep the house if you want, but you will have to include all the arrears in your repayment plan.
An Underwater Loan
If you owe more money on your house than what it is worth, it could also affect your bankruptcy. This is referred to as an underwater loan. In Chapter 7, this would not affect your ability to keep the house. As long as you can come up with a way to repay any arrearage, the trustee would allow you to keep your house.
With Chapter 13, having an underwater loan might give you the ability to get part of your lien removed from the house. The trustee would compare the amount you owe to the current market value of the house. If you owe more than it is worth, the trustee might be able to reduce the amount you owe through lien stripping. This often requires having a second loan on a house, but it might also be possible if you have only one loan.
Reaffirmation Of Debt
The third difference involves reaffirming the debt you have. With Chapter 13, you can automatically keep your house if you choose to. With Chapter 7, you will have the right to keep your house; however, you must reaffirm the debt you have with your lender. This basically means that you are asking permission from the lender to keep the loan you have, even though you are filing for bankruptcy.
Knowing the effects bankruptcy can have on your house can help you make the right decision about which branch to use. If you would like to find out more information regarding your options, contact a bankruptcy lawyer, like William C Fithian III, today.
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About Me
Several years ago, one of my best friends married the guy of her dreams. This tall, quiet man adored my friend. Almost every week during their courtship, he presented her with a beautiful, fragrant arrangement of flowers. At the time, my friend’s mom joked that her home resembled a funeral home because of all of the flowers her boyfriend sent her. After the happy pair married, they purchased a new home together and quickly began running out of money, meaning that he could no longer afford to give her the flowers she loved. They even discovered they couldn’t afford to pay the monthly mortgage. After only a few years of marriage, they filed for bankruptcy. On this blog, you will discover the ways a reputable bankruptcy attorney can help you successfully recover from financial ruin.