One of the most frequent questions I get as a bankruptcy attorney is will I lose my house?
Let’s first discuss a house in a Chapter 7 bankruptcy in New York. You get a homestead exemption of $50,000 for an individual living in a house and $100,000 for a couple living in a house. What this means is that you get to keep your house if you have $50,000 or less equity in a house if you an individual filing for bankruptcy or $100,000 equity if you are a couple filing for bankruptcy.
You calculate equity by taking the value of the house and subtracting any secured liens such as a mortgage. The balance is the equity that you have in your house.
You must reside in the house in order for you to use the exemption. If you own a rental and do not live in the rental then you are not allowed to use the homestead exemption.
What happens if you have too much equity in a property and you file a Chapter 7 bankruptcy? Well, then the trustee has the right to sell your property and distribute the profit to all of your creditors.
In a Chapter 13 bankruptcy the trustee does not take any property to sell. However, you have to show that you can afford to keep your house in a Chapter 13 or your Chapter 13 bankruptcy case may be dismissed. You have to show that you can afford to pay any back missed mortgage payments, current mortgage payments, a percentage of unsecured debts as well as a trustee’s fee. It can be very difficult to catch up with your mortgage once you fall behind because you have to make additional Chapter 13 payments in addition to your regular mortgage payments.
You get the same homestead exemptions in a Chapter 13 bankruptcy that you do in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, though, there is a Chapter 7 test. In my next post I will discuss the Chapter 7 test.
If you need help call a Buffalo Bankruptcy attorney at 716-831-1111.