Q: Chapter 7 bankruptcy and keeping your home
I have learned that if one file for Chapter 7 bankruptcy, he will lose his house if the amount of equity matches the amount to be paid to the creditors. There is one exception which is homestead exemption and allows you to protect certain amount of equity.
The question is after homestead equity and you still don't have enough in your remainder of the equity, will they still sell your house to pay the creditors. What if one meet the equity after 3 or 5 years after filing the chapter 7 bankrupty, will they sell the house after 3 or 5 years?
A: No. It is measured at the time of filing. In addition to the homestead exemption, you also have a wildcard exemption you can use to protect more equity. If you still have unprotected equity flyer that, you should consider filing a Chapter 13.
Andrellos Mitchell agrees with this answer
A: Meet with a bankruptcy attorney to determine what exemptions apply and how to calculate your equity. You need to deduct the costs of sale (6% brokerage commission, share of transfer and recording taxes, other closing costs) before figuring net proceeds to apply your various exemptions to. After all that, you may have no net equity to distribute to creditors. In a Chapter 7, if there is a small excess net equity, and the trustee wants it, and if you can afford to pay it, then you can buy out the equity with a cash payment to the trustee. Otherwise, you look at a Chapter 13, and pay the net equity in monthly payments spread out across 36-60 months. Either way, you keep your house and discharge all your debts.
Andrellos Mitchell agrees with this answer
A: You don't get much of an exemption in Maryland under the Homestead Act. Homeowners and wage earners filing bankruptcy that may have too much equity in their home and are worried about being forced to get a second loan to pay off creditors or a forced sale to pay off creditors probably should not be filing a Chapter 7 Bankruptcy, but instead should file a Chapter 13 Bankruptcy which will allow the debtor to reorganize his/her debts and give the debtor several years to pay off the debt.
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