Having equity in your house can help you get out of debt by selling the home and using the equity cushion to pay off other debts. Or, you could use the equity to obtain refinancing and get a lower house payment or even take out some of that equity in cash. With cash in hand you can get caught up on past due bills or get to home repairs or remodeling that you’ve been putting off until the expense could be covered. But if these are not options for you, and you have decided to file for bankruptcy instead you might be wondering if you will get to save the equity you have built up in your house. The answer depends on the type of case you file, and on how you elect to treat your home loan during your case.
Equity in your house is considered an asset in your bankruptcy case, and having any assets in a bankruptcy is a rare thing, but does happen. Here are some examples of what you might expect if you have equity in your home when you file a bankruptcy case:
• In a Chapter 7 case the Trustee’s job is to find assets and sell them for the benefit of repayment to your unsecured creditors. So does this mean your house will be sold? The answer depends on the amount of homestead exemption, and whether you are allowed to claim an exemption. The exemptions exist to protect things like home equity, and chances are you will not lose your house in bankruptcy just because there is some equity in the home.
• If you have filed a Chapter 13 the equity might be considered at your disposal to repay a percent of debt to unsecured creditors. Remember that in a Chapter 13 case you are repaying unsecured lenders, but only a percent of their total debt. That percent may increase if you have equity in your home. This does not necessarily require you to take out that equity, but it could result in a higher repayment percentage.
The way home equity is treated in your case depends on the specific facts of your case. No two cases are the same, and so require the skill of an experienced bankruptcy and debt management attorney for review.
For more information about how to manage debt, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.