Can I still keep my home and file bankruptcy?

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Can I still keep my home and file bankruptcy?

Asked on February 28, 2012 under Bankruptcy Law, California

Answers:

Malcolm Ruthven / Malcolm Ruthven, Bankruptcy Attorney

Answered 9 years ago | Contributor

You've asked a very large question in a very few words. The answer depends on many things. If you're current on your house mortgage payments and you're considering a Chapter 7 bankruptcy, all of your assets, everything you own, can be taken by the bankruptcy trustee for the benefit of your creditors EXCEPT property that you "exempt" in your bankruptcy filing. Let's look at your house…

- Do you owe as much or more on it than it's worth in today's market? If the answer is "Yes", then the trustee wouldn't have anything left to pay to your creditors after the house is sold and the mortgages are paid. That means your house is safe in a Chapter 7 bankruptcy. Did you ever think you'd be glad that the value of your house dropped? You might be glad right now.

- If you house is worth more than you owe on it (after the cost of selling it), then that money (your "equity" in your house) would be left over after a sale and would be available to give to your creditors. In this case, the trustee would likely sell your house UNLESS you can EXEMPT that equity. As you can imagine, exemptions are a very important subject. So, can you exempt the equity in your house? In California, here's how you find out.

1. California has a "homestead" exemption (contained in the "704" set of exemptions) you can use to exempt your home. The amount of that exemption is based on your age and other factors.

$75,000 – Single person, age 64 or younger
$100,000 – Married person with the spouse living in the house, age 64 or younger
$175,000 – Debtor or spouse (living in the house) is one of the following:
– 65 or older
– Physically or mentally disabled so as to be unable to engage in substantial gainful employment
– 55 years of age or older with a gross annual income of not more than $15,000 or, if the debtor is married, a gross annual income of both debtor and spouse of not more than $20,000.

So, if your equity in your home is not more than the above exemption amount for your situation, you can keep your home. If your equity is more than that, you may not be able to keep it in a Chapter 7 bankruptcy. You'll need to consider a Chapter 13 bankruptcy which we'll discuss in the next article in this series.

Note also that if you use this homestead exemption, you won't get the benefit of the California "Wild Card" exemption (see the next paragraph). You'll need to discuss with your bankruptcy attorney what the lack of the Wild Card exemption means to you.

2. If you only have a small amount of equity in your home, for example $10,000, then you could choose to not use the large California homestead exemption and instead use the "Wild Card" (703) set of exemptions. In this set of exemptions, you get a $23,250 to use for anything (as many items as you want) including the equity in your home. So you could use $10,000 of that exemption for your home, leaving $14,250 for exempting other things like your bank accounts, and protect your home from sale in your Chapter 7 bankruptcy case.

There are more possibilities than this. I've recently written three blog articles on this very subject, so go to my website and read those.

Todd Mosley / Memphis Bankruptcy Practice

Answered 9 years ago | Contributor

Under most circumstances, you can still keep your house if when you file bankruptcy.  If you are behind on your payments, you can catch up under a Chapter 13 bankruptcy plan.  In some circumstances, you can still keep your home under a Chapter 7 'liquidation' bankruptcy.  You will need to consult a bankruptcy attorney to review your individual situtation to see what your circumstances require.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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