Can I Keep My House in Chapter 7 Bankruptcy?
In order to protect the equity, you need to file a bankruptcy exemption on your house. If you cover the equity, you may keep it.
If not, the trustee overseeing your case will sell it.
Do You Lose Your House in Chapter 7 Bankruptcy?
You can lose your house in chapter 7 bankruptcy if you are unable to protect the equity.
If you can protect the equity, and you are currently on your payments, then you may be able to exempt your home and keep it.
Can You Buy a House After Chapter 7 Bankruptcy?
Buying a home after chapter 7 bankruptcy may be difficult, but is likely still possible.
The usual waiting period required by lenders is two years.
After that, you are free to apply.
The FHA also offers loans with more lenient credit requirements than traditional lenders.
Can I Buy a House After Filing Chapter 7 Bankruptcy?
Buying a house after filing chapter 7 bankruptcy is possible, but only after some time.
Getting a loan during the bankruptcy process is likely not possible, and you must wait at least two years after discharge or dismissal to qualify for a home loan.
What Is Bankruptcy?
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Bankruptcy is a legal proceeding in which a debtor declares their inability to pay back their creditors.
The general idea behind declaring bankruptcy is that it allows debtors a “fresh start” while offering creditors a way to receive some or all of their owed payment.
Although some debts are forgiven, filing for bankruptcy affects the debtor’s creditworthiness.
When filing for bankruptcy, secured debts are usually paid for by the asset “securing” the debt, while many types of unsecured debts can be renegotiated.
Bankruptcy (Ch. 7, Ch. 13, & Ch. 11)
There are three common types of bankruptcy known as “chapters” in the U.S. bankruptcy code, each with varying criteria and consequences:
- Chapter 7 bankruptcy is the most common type of bankruptcy.
It is known as “straight” or “liquidation” bankruptcy.
It is designed to give a “fresh start” by discharging debts that cannot be repaid through the liquidation of the debtor’s assets.
Upon filing Chapter 7, a trustee is appointed to sell the debtor’s non-exempt assets and distribute the proceeds to creditors.
For individuals, the law exempts certain assets such as retirement funds, primary residence, tools for their trade, and personal vehicles from being liquidated to pay back creditors.
This pays back creditors some of what they are owed and protects individuals from having all of their livelihood taken from them.
- Chapter 13 bankruptcy, known as a “Debtor in Possession” bankruptcy, stands in contrast with Chapter 7 because it allows the individuals to keep from liquidating their property.
Chapter 13 creates a new, more affordable payment plan for the debtor to repay creditors, usually lasting 3 to 5 years.
Once the payment plan is finished, the remaining unsecured debts are discharged.
- Chapter 11 bankruptcy is primarily for companies, allowing them a break on paying their debts in order to restructure, come up with new terms for paying their creditors, and become profitable again.
This allows companies to stay afloat while coming up with a new way to pay back creditors.
Chapter 11 is the most complex and expensive form of a bankruptcy proceeding and should therefore be considered after other options have been explored.