Can I Keep My Home If I File Under Chapter 7 Bankruptcy?
Those with mounting unpayable debt do have options if they want to keep their home and Chapter 7 is sometimes among them, but not usually. In a Chapter 7 bankruptcy, the assets of the debtor are liquidated to the extent they can be, and to the extent that the debtor has significant assets to gain repayment. In most cases, the bankruptcy court will NOT consider equity in your homestead an asset that can be used to repay creditors. In Florida, a Debtor’s primary residence, or homestead, is generally protected from creditors. However, there are some exceptions.
A special case can exist where there is little or no equity in the home for the creditors to attack. In other cases, a debtor may be able to protect the equity in their home using specific exemptions. The State of Florida has one of the most generous home equity exemptions anywhere in the country. But you must have enough money to pay the mortgage after your debts have been discharged.
Florida’s home equity exemption
Florida has one of the most generous home equity exemptions in the country, but there are specific rules that apply. For one, you must have resided in the home for at least 1,215 days.
If those conditions are met, Florida allows those in bankruptcy to protect an unlimited amount of equity in their home. Most states do not allow this and bankruptcy filers are required to use other means of saving their house.
One caveat here is that you must be current with your mortgage payments or at least be able to get current as quickly as possible.
Chapter 13 and your home
Chapter 13 bankruptcy allows you to remain in your home as divesting your assets is not a part of the bankruptcy process. In Chapter 13, a debtor may prevent a creditor, including a mortgage broker, from foreclosing on their house. This is part of the “automatic stay” that goes into effect as soon as a bankruptcy is filed. There are some exceptions such as whether the Debtor has had one or more bankruptcies pending within one year of refiling a new case. Later, the debts of the individual or couple are rolled into a monthly payment plan to repay creditors. The one caveat is that you would have to be able to repay both the prior debts that you are behind on and make your monthly mortgage payment.
The bottom line
Many individuals in the State of Florida use bankruptcy as a way of staying in their home. When a debtor is behind on payments, the creditor can file a lawsuit against them. Once the lawsuit is filed, a lien can be attached to the home meaning that the equity attached to your home becomes the property of the lien holder. The lien holder can then wait until the home is sold and recover money in the amount of the debt. It becomes more difficult to sell a title-clouded home. So avoiding a lien, even if you plan on selling the home is preferable.
Talk to a Jacksonville Bankruptcy Attorney Today
The Law Offices of Carol M. Galloway represent the interests of Jacksonville residents in bankruptcy. For any questions on how to protect your home from creditors, please call a Jacksonville bankruptcy lawyer at our office today and address any concerns you may have.