If you sold a home in the state and used the proceeds to purchase another one, the time you owned your old property counts toward the 40 months. If you've owned your homestead for fewer than 40 months, you can only exempt a specific dollar amount. You'll find the current exemption cap in The Homestead Exemption in Bankruptcy. State residency requirements.
Another federal bankruptcy code provision that can affect your homestead exemption is the day rule. To use the state or federal exemptions if the state allows it you must live in the state for at least days. Otherwise, you apply the exemptions of the state where you lived for the better part of the days immediately before the day period.
In other words, you must go back days, then look forward days. You'll apply the exemptions of the state you predominately lived in during that day period. Step Three: Is there enough unprotected home equity to trigger a sale? Losing Your Home in Bankruptcy v. Losing Your Home in Foreclosure You'll want to be able to distinguish between losing your home in bankruptcy which happens when the bankruptcy trustee sells your home to pay unsecured creditors and losing your home outside of bankruptcy that is, through the foreclosure process.
Here are some options to consider: Negotiate with your lender before bankruptcy. If you are behind on mortgage payments, you might be able to negotiate with the lender to deal with the shortfall, either informally or through a more formal "mortgage workout" where the lender agrees to renegotiate payments terms by modifying the loan or refinancing.
If you go this route, complete the loan modification before you file for bankruptcy. Otherwise, the bankruptcy will likely disrupt any ongoing negotiations. You'll find information about lender negotiation and loan modifications in Foreclosure. Consider Chapter 13 bankruptcy. If you've fallen behind on your payments but now have enough income to catch up on the mortgage arrearage over time, you can save your home in a Chapter 13 bankruptcy.
Talk to a Bankruptcy Lawyer Need professional help? Start here. Practice Area Please select Written by Amy Carst. From debt consolidation and settlement to bankruptcy, the best solution for your unique needs is dependent on multiple factors. When bankruptcy seems the only viable path to financial freedom, you must then decide which type of bankruptcy aligns with your current situation and goals. The short answer is it depends. If you are current on your mortgage and there is not much equity in your home, it is likely that you can keep your house.
If you own the house free and clear, which means there is no outstanding mortgage or home equity loan, and no liens whatsoever against the property, the bankruptcy trustee may be able to sell your home to pay off unsecured creditors. Fortunately, there are some bankruptcy exemptions when it comes to real property used as a home.
Most states have a homestead exemption that can be used to protect your property, to a certain extent. In some states, you can protect your home up to a certain dollar amount, while other states also impose a limit on the number of acres eligible for protection.
There is also a federal homestead exemption. In short, your home is probably safe. It is important to note that your homestead exemption can only be applied to one property. All that being said, without any mortgage or liens on your property, it is very possible that the calculations above will result in a positive number.
In this case, the bankruptcy trustee may decide to use the equity to pay off your unsecured creditors. To do this, the trustee will likely sell the home, give you the dollar amount of the homestead exemption, and pay off creditors with the remaining funds.
So, if you own your home free and clear, filing a bankruptcy may not be the best path towards lasting debt relief. Upsolve Community Member And this time, you will not be able to file chapter 7 bankruptcy again. You will need to wait at least eight years before you can file a second chapter 7 bankruptcy. Consult with a bankruptcy attorney beforehand to make sure that filing bankruptcy is your best option.
If you do not have any equity in your home, then there should be no problem in keeping your home in chapter 7 bankruptcy. However, if you do have a considerable amount of equity in your home, it may be a better idea to file for chapter 13 bankruptcy.
You will be able to save the equity in your home while making payments through a plan devised from your bankruptcy case. It is definitely possible for you to keep your house in chapter 7 bankruptcy.
However, it is important that you know your situation before filing bankruptcy. There are lots of rules in a chapter 7 case, and there may be a better option for you other than a chapter 7. A bankruptcy lawyer will be able to weigh in on your options and help you figure out your best option. If you don't have a significant amount of nonexempt equity in the property, it might not be worthwhile for the trustee to sell it.
From the sale proceeds, the trustee must pay any secured creditor, pay you the amount of your exemption if any , and deduct the costs of sale and the trustee's commission. If, after all of these deductions, there is nothing or little left over to pay creditors, the trustee will likely abandon the property.
After abandonment, the property is released from the bankruptcy estate. If a loan does not encumber the property, then you get to keep it. For example, if the trustee abandons jewelry or household furniture that you own free and clear, you keep the items.
If the property is encumbered by a loan for example, a car that you have financed , you have several options available to you. Learn more about keeping a car in bankruptcy. In this scenario, the trustee would abandon the car, and you would be able to keep it. If your nonexempt property is worth too much for the trustee to let you keep it, you can offer to repurchase the asset by paying the nonexempt value.
Usually, you can negotiate a lower amount that takes into account the fact that the trustee won't have to incur additional storage and sale costs. You can use the income earned after your bankruptcy filing, or sell exempt property and use the proceeds to fund the purchase.
Or, some filers pay for the property with a loan from a friend or family member. Most debtors in Chapter 7 bankruptcy don't have enough money to buy back a nonexempt asset from the trustee. If you want to keep a specific nonexempt asset, you can offer to give the trustee one of your other exempt assets in exchange. In general, whether the trustee will agree to accept a different asset in exchange for your nonexempt property will depend on the value of the asset and the cost and labor associated with selling each type of property.
Learn more about the basics of property exemptions in bankruptcy and when a trustee might object to your exemptions. It's tempting to engage in a certain amount of exemption planning before filing for bankruptcy, including converting nonexempt property property you can't protect into exempt assets you can keep in a bankruptcy case.
It's possible to do if it is done in good faith and not with the intent to defraud creditors, but that might not be an easy threshold to meet. Also, bankruptcy courts have reached inconsistent conclusions regarding how much exemption planning is proper, so it's imperative to discuss your plans with a local bankruptcy attorney.
In this article, you'll learn more about converting nonexempt assets into exempt ones. Exemption planning is the practice of organizing your financial affairs in a way that maximizes your exemptions and allows you to protect the most amount of property in bankruptcy.
Converting nonexempt property into exempt assets can be part of exemption planning. However, if you engage in excessive exemption planning, it can be considered bankruptcy fraud and result in criminal prosecution or an objection to your bankruptcy discharge —the order that erases qualifying debt.
It's possible to engage in a reasonable amount of exemption planning before filing for bankruptcy, including converting some of your nonexempt assets into exempt property. For instance, you can use money in the bank which is often nonexempt for necessary living expenses such as rent or food. You also have the right to sell your property for the going market rate to pay for necessary expenses.
In either case, it's a good idea to keep records of how you spend the funds.
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