Many individuals who are struggling with debt worry they will lose their home if they file for Chapter 7 bankruptcy. Consequently, we hear the "Can I keep my house in Chapter 7 bankruptcy" question quite often. Keeping your property in Chapter 7 bankruptcy depends on how far behind in your mortgage payments you are and how much equity you have in your home. For individuals filing Chapter 7 bankruptcy in Sacramento California, the state homestead exemptions provide for the generous protection of your home equity that can help you keep your house.
California Homestead Exemption
Keeping your house in a Chapter 7 Bankruptcy in California depends on how much equity you have in your home. The California Homestead Exemptions allow debtors filing for bankruptcy to protect up to $75,000 worth of equity for single filers, $100,000 for heads of households, and $175,000 for individuals that are disabled, over 65, or make less than $15,000 per year. Assuming this covers the amount of equity you have in the house, you should be able to keep it during the course of your Chapter 7 bankruptcy. The reasoning behind this is due to the fact that if selling your property wouldn't benefit your creditors, it's not worth the time and effort for the bankruptcy trustee to sell your home.
California Mortgage Payments
If you are currently behind on your payments, Chapter 7 bankruptcy can act as a buffer that can temporarily prevent foreclosure while you attempt to modify your loan with your mortgage lender, but it is not a permanent solution. Chapter 7 bankruptcy can be used as a strategic debt relief solution if you expect to fall behind on payments in the near future but are current at the moment. In other words, it's generally better to be current on your California mortgage payments before filing and throughout your Chapter 7 bankruptcy.
Chapter 13 Bankruptcy Alternative
For those who are behind on mortgage payments, filing for Chapter 7 bankruptcy isn't a comprehensive default cure. Consequently, if you are facing foreclosure due to falling behind on mortgage payments, Chapter 13 bankruptcy may be a better alternative as it will allow you to effectively lump your missed payments into your monthly Chapter 13 repayment plan and pay it back over a period of three to five years.
Sacramento Bankruptcy Attorney
Chapter 7 bankruptcy is an efficient means of eliminating unsecured debt such as medical debt and credit card debt, however, it may not be the best option for your unique debt situation. If you have questions concerning the best choice for you, contact your local Sacramento bankruptcy attorney to discover all your options.