You Can Lose Your Home In A Bankruptcy If Your Equity Is Too High
You Can Lose Your Home In A Bankruptcy If Your Equity Is Too High
When you have money, you sometimes forget how difficult it is to get by without it. And those in financial difficulties often worry if they are in danger of losing their home when they file for bankruptcy. Others believe that the filing of bankruptcy will automatically prevent them from losing their home. In truth, however, whether you get to keep your home under bankruptcy depends on a number of things.
To make a determination as to what will happen to your home if you declare bankruptcy, you have to look at something called the homestead exemption. This is the primary determinant of what happens to your home under bankruptcy. There are various legal definitions of homestead exemption. In regards to a bankruptcy filing, however, it is the amount of the value of the home that is protected from unsecured creditors.
The rules for homestead exceptions, however, are normally only brought to bear in a bankruptcy case if the homeowner is up to date with their mortgage payments. If cases where the owner is not current, depending on the laws in his state, he may be subject to being foreclosed on by the creditor. If he is foreclosed, a bankruptcy may delay the creditor taking ownership, but it will not prevent it.
Before you even worry about the homestead exemption, however, know that for it to apply, your mortgage payments must be up to date. Assuming that they are, however, the first thing that you need to do is to find out what the homestead exemption amount is for homes in your area. You then have to calculate the amount of equity that you have in your home. If the equity that you have in your home is less than the homestead exemption amount, then your home is safe from creditors, and you will end up keeping your home.
On the other hand, If, however, your equity is larger than the homestead exemption amount, then you may be at risk for potentially losing your house. As an example, assume that the homestead exemption in your state is one hundred thousand dollars and your equity in the home is $80,000, your home is safe. But, if your equity is $110,000, then your home would be at risk.
Normally you want to have as much equity in our home as possible. Under bankruptcy rules, however, you don't always want that. Since the equity in your home plays such an important part in whether you will be able to keep your home or not, it is extremely critical as to how you evaluate your home. For example, an over evaluation could very well cause you to lose your home. That's why you want to use the most conservative figures possible when evaluating the value current market price for your home.
Filing for bankruptcy is an emotional issue as well as financial. And, it is worth recognizing that in some cases, it is really not worth it financially to keep your home. Although, your home may provide a great emotional value for you, where a bankruptcy is concerned, everything eventually comes down to money. In this scenario, your best financial move may be to rent until you can get back on your feet again.
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