It is possible to keep your home during Chapter 7 bankruptcy proceedings by filing for relief known as an exemption. Whether or not that exemption is granted depends on a variety of factors, including the value in the home at the time of the bankruptcy.
Every state has a different exemption amount — if the value of the home goes over that amount, then individuals cannot usually keep the home. The trustee in the bankruptcy proceeding must sell the home to pay off creditors. If the value is below the exemption amount, the individual can usually keep the home if he or she files the appropriate documents.
Keeping the home might require continuing to pay a mortgage payment or work with a mortgage company to modify the loan. Working with a mortgage company on such an issue during the middle of a bankruptcy proceeding can get complicated, which is why it’s always helpful to have professional assistance during the process.
In some cases, particularly when home values are right at the exemption line, a trustee might hold the bankruptcy case open a few months to see if home values will increase significantly. This can alter whether a person is able to keep his or her home during a Chapter 7 bankruptcy. However, a case can only be held open for a certain amount of time before proceedings must move forward. Working with a professional on your side, you can make sure your case doesn’t go beyond such requirements.
Understanding the specific rules in your state is important to moving forward with a bankruptcy experience that is as positive as possible. This is especially true if you wish to keep certain assets, such as a home, during bankruptcy.
Source: BankRate, “https://www.bankrate.com/finance/debt/how-safe-is-house-chapter-7-bankruptcy.aspx,” Justin Harelik, accessed Aug. 07, 2015
