Impact of Chapter 7 on Your Home
Chapter 7 bankruptcy may be appropriate when you face rising debt. Often, debtors are concerned that they will lose their primary residence once they file for bankruptcy and receive discharge of their debt. Various factors play into whether a home is exempt from Chapter 7 bankruptcy filing. At the Bankruptcy Center of Illinois, our DuPage County attorneys can help you understand eligibility for exemptions which may help you hold onto your home. We represent individuals filing for Chapter 7 bankruptcy and aggressively advocate on your behalf to protect your assets.Impact of Chapter 7 on Your Home
The important question regarding whether you can keep your house when filing for Chapter 7 bankruptcy is how much equity you have in your home. Creditors will be paid with the sale of your home if you have substantial equity. However, if you do not have significant equity, you may be able to keep your home because the sale would not produce payments for creditors.
Illinois has a set of exemptions which may protect property when you file for bankruptcy. Property that is exempt cannot be used to pay creditors. This property may include your house, your vehicle, or a checking account. In order for exemptions to apply, you must reside in Illinois more than 730 days (two years) before filing for bankruptcy.
The homestead exemption is a type of bankruptcy exemption. Under Illinois law, the equity in your residence is protected up to $15,000. A residence includes a farm, lot with buildings, condominium, or mobile home. In addition to Illinois’s exemptions, you may be able to apply the federal bankruptcy exemptions. A skilled attorney can help you understand your options.Role of the Bankruptcy Trustee Regarding Your Home in Chapter 7
In a Chapter 7 bankruptcy, the trustee sells nonexempt property in order to pay creditors. The trustee administers your case, selling assets to pay your creditors. The trustee may object to exemptions, including potential exemptions concerning your house.
If there is significant equity a trustee can use to pay creditors, a debtor may lose their home. A bankruptcy trustee will not sell your home if you can protect your equity through the homestead exemption. If there is not available equity, there is no money to distribute to unsecured creditors.
The real estate market changes quickly and can impact your ability to hold onto your house during bankruptcy. Debtors may find that their home equity rises and exceeds the allowed exemption in a short period of time. It is important to calculate the fair market value of your home when determining whether your house may be sold.Foreclosure versus Bankruptcy
Foreclosure is different from bankruptcy. Even if you file for bankruptcy, you can still lose your home if you do not meet your mortgage payments. Chapter 7 bankruptcy is not able to help you keep your home if you cannot meet your payments. You must make monthly payments at the time you file for bankruptcy, or shortly after, and you remain current in payment in the future. Delaying a foreclosure is possible under Chapter 7, but it cannot prevent a foreclosure. You may be able to negotiate with your lender and modify the loan or refinance. If instead you have enough income now to pay the mortgage arrearage, you may want to consider filing for Chapter 13 bankruptcy.Understand the Impact of Chapter 7 on Your Home By Speaking with a DuPage Bankruptcy Attorney
Chapter 7 bankruptcy can help debtors alleviate financial pressure. In some cases they may be able to retain their home as well. Consulting a DuPage County bankruptcy lawyer is the first step to understanding your legal rights and options. We are here to help you figure out the appropriate long-term solution for your debt. If you are feeling overwhelmed, call our office at (773) 993-0024 or reach us online to learn more.