Filing for Chapter 7 bankruptcy is a huge decision to make, primarily because of the way it affects your credit, but also because of the effects it can have on your assets. One asset you might not want to lose is your house, yet there is a chance you could in Chapter 7. Here are three ways Chapter 7 bankruptcy can affect the house you live in.
The trustee could take the house
The first thing to be aware of is that the bankruptcy trustee handling your case may have the right to take your house away from you. Bankruptcy trustees have several goals when handling Chapter 7 cases, and these include:
- To verify a person's eligibility to file
- To verify a person's assets and debts
- To pay off as much debt as possible by collecting and selling assets a person owns
If you have equity in your house, the trustee might want to take your house to achieve the third goal listed above. If the trustee can make money by selling your home, he or she will have a big incentive to seize it and sell it as a way to pay off the debts you owe.
When determining the equity in your home, you might be able to subtract the amount of the Homestead deduction in your area from the equity. This can be a complicated subject, but your lawyer will explain how this works.
You could lose the house in foreclosure
The second thing that could happen to your home is foreclosure. Foreclosure is not a step in bankruptcy, but it is a risk you take if you are behind on the payments. When you file for Chapter 7, it will stop the foreclosure process, but it does this only temporarily. After the case is settled, the lender will have the right to continue the foreclosure process if you are behind on your mortgage payments.
You might be able to keep it
If you are current on your house payments and do not have a lot of equity in the house, there is a good chance that you will be able to keep the house if you file for bankruptcy. To determine if this is an option, you will need to prove the current value of the house. This is something you could do by producing an appraisal, or by submitting a copy of your property tax form. Property tax forms state accessed values of homes, and these can be used in bankruptcy.
If you do not want to lose your house, talk to a bankruptcy attorney like Flippin Thomas C. They might be able to help you select the right path that would allow you to keep your home.