Will I lose my house if I file for bankruptcy?

Many individuals and families facing bankruptcy share a common concern, and that is:  Will they have to surrender their homes, as a result of declaring bankruptcy?  The answer to this question is dependent upon a couple of different factors.  The first concern involves the type of debt relief that is being pursued:  Chapter 7 or 13?  The second is the value of the equity of the home, if Chapter 7 bankruptcy is being sought. 

Variables such as personal assets and property exemptions will always come into play when debt relief is sought through the courts.  Petitioners under Chapter 7 Bankruptcy, for instance, will be afforded the opportunity to keep their homes, so long as the value of the equity they possess in the property does not exceed the dollar value of that which is allowable for real estate exemptions in the state where the bankruptcy petition is to be filed. 

Here is an example:  A general homestead exemption in the state of Virginia is $5,000.  If your home is valued at $150,000 and you possess only $5,000 in equity or less in the property, your home will be exempt from liquidation during a Chapter 7 debt relief proceeding.  Other factors such as joint ownership and dependents will have an effect upon the allowable exemption value of your property.

However, such intricacies are better left to be addressed by legal professionals who are well versed and experienced in the language and applications of the bankruptcy codes.  Bankruptcy cases are not cookie cutter affairs, because not every debtor is in possession of the same assets or entitled to the same exemptions.  In addition, not every debtor is obliged to their creditors at the same level of liability. 

For individuals who possess greater equity in their homes than the state regulated exemption limit, there is always the option of Chapter 13 bankruptcy, which allows petitioners to review their debts and draft a repayment plan to present to the courts.  Chapter 13 debt relief – or bankruptcy through a repayment plan – allows debtors to make single monthly payments to an appointed trustee who then distributes the funds to the petitioner’s creditors for a period of three to five years. 

During the repayment period, foreclosure proceedings can be halted, past due mortgage payments can be reconciled and the terms of the mortgage agreement can be renegotiated to facilitate the homeowner’s financial situation.  This means that creditors and collections agencies cannot call and harass you.  You can go through a formal process and ask them to cease and desist, or you can hire an attorney who will handle this for you.

In spite of popular belief, lending agencies are not interested in taking over the ownerships of mortgaged properties.  It is only as a last resort to recover their losses that a bank chooses foreclosure over bringing a mortgage back to a current status.  The real estate market is flooded with bank repossessions and the lenders want to stem the tide. Courts, too, are overwhelmed with new waves of foreclosures.

If you are facing bankruptcy, and you have questions pertaining to your rights as a debtor and homeowner, contact a debt relief attorney to discuss the debt discharge options available to you.  Every day you wait is another day of uncertainty.  Peace of mind is just one of the many positive side effects that bankruptcy can provide.  So pick up the phone and contact an attorney today.

Bolger Law represents clients in Fairfax, VA; Washington DC; as well as in Manassas, Woodbridge, Sterling, Gainesville, Chantilly, Springfield and Centreville, VA.