Protecting Your Rights And Your Future

Is your home at risk in bankruptcy?

On Behalf of | Oct 7, 2020 | Personal Bankruptcy

One hesitation that Arkansas debtors may have about filing for bankruptcy is the fact that they are afraid of losing their home. However, in many situations, your home is protected when you file for bankruptcy. This is an incentive for you to use bankruptcy to get a fresh financial start.

Your home may not be at risk

First, your home is generally not at risk during Chapter 13 bankruptcy. This type of bankruptcy is a restructuring of your debt. You still need to pay your debts, although you get a more reasonable timeframe to do so. Chapter 7 would result in liquidation for the debtor, and this is where people worry about losing their home. However, you are able to reaffirm your mortgage. If that is the case, you continue making your mortgage payments and can keep your home. Your primary resident would not be liquidated.

Exceptions to the rule

A homestead exemption to the bankruptcy laws is not unlimited. There is a cap on the value of the home that can be exempted. Moreover, if you bought your home within three years of declaring bankruptcy, it may be at risk depending on its value. Even if you elect to keep your home, you must still make all of the necessary mortgage and tax payments, or else you are at risk of foreclosure and having your home forcibly sold.

You may want to contact a Chapter 7 bankruptcy lawyer to learn more about whether bankruptcy is the right option for your particular situation in life. Your attorney may explain how the bankruptcy laws work. Then, they may review your finances to advise you about whether you are a suitable candidate for bankruptcy. If you are, it might provide you with a fresh start in life free of the debt that is currently overtaking you.