A common question we get from our clients and prospective clients in New York City, Nassau. Suffolk and Westchester Counties is whether they will be able to keep their homes if they file for personal bankruptcy.
This is Part II of a two part series on this issue. In Part I we looked at the information we need to answer the question of whether a debtor will get to keep his or home in bankruptcy. In this Part II we will look at different bankruptcy strategies that can be used in different situations.
1. Chapter 7 to Wipe Out Unsecured Debt. For many people considering bankruptcy who own a home, the problem is not that they can’t pay the mortgage, but that all of their debts combined are too much for them to pay. They may have enough to pay their living expenses and the mortgage, but not also make credit card payments. In that situation, assuming that the debtor has equity less than his or her applicable homestead exemption (discussed in Part I), a chapter 7 personal bankruptcy filing may be used to wipe out the unsecured debt. There are specific requirements for chapter 7, and not everyone will necessarily will be eligible for chapter 7. However, even if you own a home there is a still a good chance that you are eligible for chapter 7.
2. Chapter 13 to Cure Mortgage Arrears. If you are behind on your mortgage, or are not eligible for chapter 7, chapter 13 bankruptcy may be another strategy to save your home. We have covered eligibility requirements for chapter 13
in a prior post. In essence, the debtor would keep paying the current mortgage payments as they become due each month after filing bankruptcy. The arrearages (past due payments) on the mortgage would need to be cured over time in a plan of 3-5 years. Whether or not anything would need to be paid to lower classes of debts, such as unsecured credit card debts, would depend on a variety of factors and is something we have examined in a number of prior posts.
At Starr & Starr, PLLC we are active in representing debtors in bankruptcy cases and have experience in helping people save their homes in bankruptcy Please feel free to contact us at 888-867-8165 or by e-mail at info@starrandstarr.com to schedule a consultation.