For Floridians who are facing overwhelming debt, bankruptcy is a viable strategy to get into a better financial position. Often, people resist bankruptcy because they are fearful of what it entails. That includes the prospect of surrendering certain properties like a home. There are, however, ways for a person to retain their home even with bankruptcy.
Understanding the factors in keeping a home after bankruptcy is essential. Those filing for personal bankruptcy generally have two options: Chapter 7 and Chapter 13. Chapter 7 is a liquidation bankruptcy while Chapter 13 requires people make payments to a bankruptcy trustee for three to five years. While property will likely be lost in Chapter 7, Chapter 13 allows people to keep a home, an automobile and other items if they make the necessary payments.
Home equity will be considered in the case if the person wants to file for Chapter 7. The value of the property and what the person still owes to own it outright will be calculated to determine its equity. If, for example, the person has a mortgage or a home equity loan and the amount they owe surpasses the home’s market value, it has negative equity. Therefore, it cannot be sold as part of a bankruptcy. If the equity goes beyond what can be exempt, the debtor might need to sell it to complete the bankruptcy.
Finally, the debtor’s ability to pay the mortgage will be assessed. If the person goes through with bankruptcy, it is possible to keep the home provided the mortgage can be paid. For many debtors, simply clearing the other bills will leave them sufficient income to pay their mortgage. If the debtor cannot pay the mortgage, the bank might foreclose and the home will be lost. Falling into unmanageable debt can happen to anyone regardless of the type of work they do and lifestyle they live. When thinking about bankruptcy, it may be beneficial to have legal advice. An experienced legal professional may be able to help with the case and in moving forward on stronger financial ground.