Connecticut residents who file for bankruptcy often feel that it is one of the most overwhelming periods of their lives. Bankruptcy filers have often run out of ideas regarding how to handle both the present and future financial obligations they face. One major worry for many of these filers is whether they will be able to keep their home.
Bankruptcy and home ownership
Bankruptcy law provides two types of bankruptcy filings for people who possess more debt than they can manage. The ability of bankruptcy filers to maintain ownership of their homes is largely dependent on what type of bankruptcy they choose to file.
There are many differences to be counted between Chapter 7 and Chapter 13 bankruptcy structures, and one of the most important of these differences is the exemptions that filers are allowed to take. Simply put, if the value of the home is at or below a particular amount, the filer may possess the opportunity to continue ownership of the property. The exemptions included with Chapter 7 bankruptcies are lower and stricter than Chapter 13 exemptions. This fact gives Chapter 13 filers a better chance of keeping their homes than Chapter 7 filers.
Chapter 7 bankruptcy filers are not disqualified from keeping their homes, however. Filers with little or no equity in a home will likely find that the house is exempt from the bankruptcy process. But filers with a substantial amount of equity in a home may need to sell the home to satisfy debt obligations. Filers with more equity than the exemption will also receive the opportunity to “repurchase” their home by paying an amount equal to the home’s value to the trustee.
It is also necessary for bankruptcy filers to demonstrate that they can afford the payments on their home after the completion of the bankruptcy process. For many filers, paying the mortgage is a lot easier after the payment or discharge of other debts.
Filing for bankruptcy is a complicated process that includes legal nuances not familiar to the average person. However, the bankruptcy process is helpful for protecting individuals who are in over their heads with financial obligations. The process may also allow filers to build a healthier financial future when executed correctly. Debtors with bankruptcy questions may find it helpful to speak with an attorney.