What
About My House?
In the current economic times, it is quite
common to use a Chapter 7 Bankruptcy to surrender all real
property and simply walk away from a house. This is a good
alternative if you do not have the ability to pay your mortgage
and the fair market value of your property is less than what
you owe. If you choose to surrender your real property in
bankruptcy, the loans associated with the property are extinguished.
This holds true even if you have more than one property.
In a Chapter 7 Bankruptcy, you may keep your primary residence
if you can stay current on your payments and the amount of
equity in the home is below the appropriate level. If you
have owned your primary residence for less than 1,215 days
you can retain up to $125,000 in equity. If you have owned
your primary residence for more than 1,215 days you may retain
up to $550,000 in equity. This protection is due to the “homestead”
laws. As such, this protection only applies to your primary
residence and not a second home, investment property, or vacant
land.
Owning multiple properties may also affect your ability to
file a Chapter 13 Bankruptcy. Currently, you may be eligible
for a Chapter 13 Bankruptcy if you do not have more than $1,010,650
of secured debt (i.e. real property mortgages, car loans,
etc.) and not more than $336,900 in unsecured debt (i.e. credit
cards). We have seen instances where people have too much
debt to qualify for a Chapter 13 under these guidelines.
Assuming that you do qualify for a Chapter 13 Bankruptcy,
you may be able to completely eliminate the 2nd mortgage of
your primary residence if the fair market value is less than
the amount due on the first mortgage. This effectively causes
the 2nd to become unsecured and, therefore, it can be removed.
Also, if you are late on your mortgage payments and wish
to keep your home, you can include the past due payments in
your Chapter 13 payment plan. Under a Chapter 13 Bankruptcy,
you will have to make the regularly scheduled mortgage payments
in addition to your Chapter 13 plan payments.
Finally, if you cannot qualify for a Chapter 13 Bankruptcy
because you exceed the debt limits, on either secured or unsecured
debt, you may be able to file for Chapter 11 or Chapter 7
relief instead. Please contact Christopher Legal Group for
a personalized analysis of your particular situation.
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