Bankruptcy doesn’t mean you will lose your house

On Behalf of | Apr 3, 2019 | Bankruptcy Law Basics, Debt Relief, Home Ownership

The financial circumstances people experience are often largely out of their control. No one decides to become sick with a severe and debilitating condition that keeps them from working. Similarly, no one hopes to wind up in a car accident that leaves them with injuries and major bills. There are countless scenarios that people encounter that leave them financially overextended and struggling with debt.

While you should do your best to repay any amount of money you borrow, sometimes predatory lending and unfortunate circumstances combine in a way that leaves people unable to meet their financial obligations each month. For those struggling to make ends meet, bankruptcy is the simplest solution for handling most forms of unsecured debt.

However, a combination of social stigma attached to bankruptcy and concerns based in popular myths about bankruptcy may keep people from seeking the relief they need. One commonly cited concern people have for avoiding bankruptcy is not wanting to lose their home.

You can protect your home in bankruptcy proceedings

The point of bankruptcy is to help you overcome debt so that you can reach financial stability. Making people homeless would not necessarily improve their financial circumstances. The bankruptcy laws in Tennessee offer less protection for homeowners than many other states. Those who file Chapter 7 bankruptcy proceedings have the right to exempt a certain amount of equity in their homes.

Any amount of accrued equity and value in the home up to $5,000 for one filer or $7,500 for a married couple is not subject to liquidation by the courts as part of divorce proceedings. Those over the age of 62 receive additional equity exemptions. For those who have more than $5,000 in equity or who make too much money to pass the Tennessee means test, Chapter 13 bankruptcy may be the better option.

Chapter 13 bankruptcy involves repaying creditors for a specified amount of time, after which you receive a discharge of your unsecured debts. You can typically preserve any amount of equity in your home with a properly executed Chapter 13 repayment filing.

Bankruptcy could even help you stop foreclosure proceedings

If you have missed several mortgage payments, your bank may soon take action to reclaim your property. Whether you have just received notice of filing or have fallen several months behind and know that foreclosure proceedings are imminent, bankruptcy can help you stop the immediate threat of foreclosure.

You will then have the potential to renegotiate a mortgage whose terms are more reasonable. Beyond that, you will have more of your monthly income available to allocate to your mortgage once you receive discharge of your unsecured credit card and medical debts.

If you are concerned about protecting your equity in your home during bankruptcy proceedings, talking about your worries with a Tennessee bankruptcy attorney can help you make the best decisions for your and your family’s financial future.