Filing Bankruptcy with Equity in Home

Filing for bankruptcy with home equityBankruptcy is designed to provide those struggling financially to get a fresh start. It has its advantages and disadvantages, making it something that will work for some but may not work for all.

You might be considering bankruptcy, but are worried you will lose every piece of property you own. This is especially true if you have any equity in your home. The good news is that having equity in your house does not keep you from filing for bankruptcy. It just means there is a chance you could lose the home if you cannot exempt it. The type of bankruptcy you file will play a role, as well as how long you have owned the home and which exemption scheme you end up allowed to use.

Two Types of Bankruptcy

When it comes to bankruptcy, the two main types are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Each option offers different benefits but both allow you to exempt a certain amount of equity in your house. What happens to the remaining non-exempt equity differs between the two.

In Chapter 7 bankruptcy, any non-exempt property you have will be turned over to the bankruptcy trustee in order to be sold to pay off parts of your debt. They would sell your house and use the proceeds to pay any liens, taxes, mortgages, sales expenses and your exemption amount. The trustee then gets a commission from the sale as payment and the rest of the money gets distributed to creditors. In the event your house will not provide enough money to make a worthwhile distribution amongst your credits, there is a chance the trustee will not sell your home. If you really want to keep it, you might also be able to substitute cash or other exempt property equal to what the trustee would make from selling your home.

When it comes to keeping your equity in your home, filing under Chapter 13 bankruptcy might be your best bet. Although it will not be free, in Chapter 13 you get to keep your home and other non-exempt property. This is because you will be paying your creditors that non-exempt amount through your three to five year repayment plan.

NJ Lawyer Offers Sound Advice for Clients

As mentioned earlier, bankruptcy is not for everyone. It is a process that requires experience and attention to detail, something you can only get from an experienced lawyer. If you are considering bankruptcy in New Jersey, you need to contact the Law Office of Joel R. Spivack. In addition, you can learn about bankruptcy alternatives if it looks like bankruptcy is not your best option. Contact them today by filling out the online contact form.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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