If a person has home equity, their state’s homestead exemption laws and their financial circumstances can determine the appropriateness of bankruptcy. Having home equity doesn’t determine eligibility, but the equity’s exemption status can determine whether a person can keep their home from being sold during bankruptcy proceedings. Read on to learn how to protect a home during bankruptcy filing.
Bankruptcy and Home Equity
If the home is worth more than the lien and mortgage balance, there is equity that is considered an asset during bankruptcy. If a person files for chapter 7, the trustee can legally sell non-exempt assets, including homes, to repay creditors. In chapter 13, the value of non-exempt assets must be repaid through a payment plan.
Due to these facts, the amount of equity present in a home can play a vital role in a person’s decision to request a bankruptcy. If the homeowner can’t exempt all of their home equity, they run the risk of losing the home during chapter 7 proceedings or having to repay unsecured debts during chapter 13 bankruptcy. Thankfully, most states let people protect a set amount of equity in their homes from seizure by bankruptcy trustees. A bankruptcy attorney in Hamilton, OH can provide more information on equity exemptions.
Bankruptcy Filing and Homestead Exemption
During chapter 7 bankruptcy proceedings, exemptions allow homeowners to retain a certain portion of their assets. However, the amount of property that can be kept depends on the state’s exemption laws. Most states have homestead exemption rules that are specifically intended to protect some of the equity in a primary residence. If a home’s equity can be fully exempted, a chapter 7 bankruptcy trustee cannot sell it to repay creditors.
Bankruptcy can be a trying time, as assets are confiscated and sold to repay debts. However, homestead exemption laws allow borrowers to shield the equity in their homes and possibly prevent the home from being sold. These laws vary by state, and borrowers should Contact Dean Snyder Attorney at Law, a bankruptcy attorney in Hamilton, OH, to determine whether they can exempt some of all of their equity and thereby protect their home before filing for bankruptcy.
