If you’re considering filing for bankruptcy, you may be wondering if you’ll lose your home in the process. The answer is not clear-cut. While it’s true that some people do lose their homes to foreclosure after declaring bankruptcy, there are ways to protect your home and keep it during and after the bankruptcy process.
Here’s what you need to know about how bankruptcy affects your home.
Chapter 7 versus chapter 13 bankruptcy
Chapter 7 and chapter 13 bankruptcy are two distinct types of personal and business bankruptcy filings available in the United States. Chapter 7 bankruptcy is a liquidation process in which a court-appointed bankruptcy trustee may sell non-exempt assets to pay off debtors.
Chapter 13 bankruptcy allows individuals or businesses to restructure their finances under a protected repayment plan agreed upon by creditors and approved by a court. This process will enable the debtor to reduce payments on secured debts and make repayment plans for extended periods of time.
It may be possible to keep your home if you file for Chapter 7 bankruptcy. Indiana has a homestead exemption that states you can protect up to $19,300 of your home’s equity ($38,600 if you and your spouse have joint ownership). If the house’s value is below the exemption level, you won’t need to worry about losing the home once the bankruptcy is complete
Depending on your circumstances, filing for Chapter 13 bankruptcy may allow you to keep your home while restructuring and repaying your debts under a court-arranged payment plan. One of the main benefits of filing for Chapter 13 is that it allows individuals to keep their properties – as long as they make affirmed payments on time.
Understandably, you want to keep your home and provide stability for your family during this challenging time. If you’re struggling with debt, it’s essential to understand all of your options so you can make the best decision for your situation.
