I Have a lot of Equity in My House. Can I File Bankruptcy and Keep My Home?

“Will Chapter 13 Bankruptcy Help Me Keep My House Even if I Have a lot of Equity?” is a common concern for homeowners contemplating bankruptcy. A Sacramento bankruptcy lawyer can help alleviate these concerns with clear, thorough explanations of the ins and outs of Chapter 13 bankruptcy.

In most cases, homeowners are allowed to keep their homes through the protection of Chapter 13 bankruptcy proceedings – even if they have a significant amount of equity. But before diving deeper, it is essential to understand what Chapter 13 bankruptcy is.

Chapter 13 bankruptcy, commonly referred to as reorganization bankruptcy, allows individuals to develop a plan to repay their debts. Unlike Chapter 7 bankruptcy – which seeks to eliminate most or all of an individual’s unsecured debts – Chapter 13 bankruptcy aims to restructure the individual’s debt repayments.

A Sacramento Bankruptcy Lawyer can Exempt Home Equity

A Sacramento bankruptcy lawyer ensures that clients understand the personal implications of filing for bankruptcy. Specifically, when it comes to keeping their home while filing for Chapter 13 bankruptcy.

One significant advantage of filing Chapter 13 bankruptcy is the ability to pause foreclosure proceedings. If a homeowner is behind on their mortgage payments, initiating a Chapter 13 bankruptcy can bring any impending foreclosure to a halt. This legal provision is known as an “automatic stay,” which, upon filing for bankruptcy, stops most collection activities from creditors.

In addition, Chapter 13 bankruptcy allows homeowners to make up missed mortgage payments over time under the protection of the bankruptcy court, a process known as curing a default.

However, it’s critical to note that, in bankruptcy, equity may present an issue if the homeowners’ equity significantly surpasses the homestead exemption limit in California. The homestead exemption affects how much equity the courts will protect from creditors in a bankruptcy proceeding. If a home’s equity significantly exceeds this exemption limit, filing for Chapter 13 bankruptcy becomes an important option.

Hence, bankruptcy laws are complex, and nuances may be easy to overlook if you are not accustomed to their intricacies. Before deciding whether to file for bankruptcy, you should consult a seasoned Sacramento bankruptcy lawyer. Our attorneys have a thorough understanding of bankruptcy law and can help guide you through all stages of the Chapter 13 bankruptcy process. We treat every case with the utmost respect and diligence it deserves.