Q: If I file Chapter 7 due to small business loss, could I lose my home?
I am a sole proprietary business owner and married. I started my home business in August of 2019 and I work another job. The business has taken a hit due to COVID because most of the income is generated in-person sales. I was thinking of filing a chapter 7 but I was unsure how that could impact my home mortgage.
A: Depends on how much equity you have in your home. You should consult an experienced bankruptcy practitioner.
A: In Illinois a homeowner is entitled to an exemption for their home. The exemption amount is $15,000 per person - so $30,000 if a married couple (assuming both spouses file). Since you are married, if you have more than $30,000 in equity, then you may have issues. If you have less than $30,000 in equity, you will be able to keep the house. The only question at that point is whether or not you will file a loan reaffirmation agreement with the bank. As a practical matter, I usually have a home inspected by a broker from the area to give me a listing price and an expected selling price. These can be guestimates, but they are useful to present in the bk case and to talk to the trustee. The bottom line here, is if you have less than $30,000 in equity, the bk will have a relatively small impact because your asset will be considered exempt. If you have more than $30,000 in equity, then your case will need a more detailed look. Hope this helps. - Bryan.
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