Whether you are debating between a Debt settlement and bankruptcy filing or have decided to file bankruptcy but are worried about the effects it might have on your credit, you are bound to have many questions.
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The short answer is no. The most common way that a person loses their home after bankruptcy is when they cannot afford to make the monthly mortgage payments even after eliminating their other debts.
Your home, depending on how much equity you have in it (i.e. current market value – total mortgage
balance), may or may not be a property of the estate for which a trustee in bankruptcy will have an economic incentive to liquidate.
When a homeowner is “underwater” on her mortgage (i.e., you owe more on your mortgage than what the house is worth), a trustee in bankruptcy has no economic incentive to liquidate the asset.
Even if you have some equity in your home, you may be able to retain your home by claiming a homestead exemption.
For example, if you are filing in California in 2011, and you are 65 years of age or older, you may claim up to $175,000 in homestead exemption. (Note: The exact amount of homestead exemption changes periodically.)
In the event that a trustee determines that there is administrable equity in your home, the trustee is
likely to offer you an opportunity to purchase the property back from the bankruptcy estate for the amount that the estate would have realized had the trustee in fact sold the property.
During periods of rising real estate values, trustees in some cases may independently value properties
by having a real estate broker run comparable sales and listings and conduct on-site valuation.
If you are considering bankruptcy at a time when the value of your real property is rising, you might want to hire an appraiser or a real estate broker to get a strong handle on the value of your home before you file your bankruptcy.
The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.