“Keeping your house is not a problem.” We say this to so many of our clients after they let us know that they absolutely must keep their house. They have heard differently from many sources: the internet, other attorneys, their “friends”, the person down the street have told them that if they file for bankruptcy protection, they will lose their house. But we are telling them something different. And we can back it up: we will not allow you to be placed in a position where you have to sell your house involuntarily unless we have discussed this thoroughly BEFORE we file any papers with the Court.
How do you keep your house? Let’s look at a case I had today in the Court. My client owns a house in her name only that she bought for $152,000 several years ago. The house has a mortgage balance of about $100,000. That would give her equity in this house of $52,000.
That would give her equity in the house of $52,000 (subtract the mortgage balance from the fair market value of the house.) And if this were the case and she filed for a Chapter 7 bankruptcy (you can read more about Chapter 7 on our website), the Bankruptcy Trustee would sell the house, pay the closing costs and his or her fees, give about $23,000 to the client, and use the rest of the money to pay my client’s creditors.
But my client wanted to keep the house. There were two options: One was to pay the excess equity (in this case, $29,000) to her creditors through a Chapter 13 reorganization plan, a plan that would run about five years. But my client didn’t really have the money to pay into a reorganization plan, so I dug deeper.
I asked her about the condition of her house. She told me about mold, broken windows, unfinished rooms, and other problems that have multiplied since her divorce. She just hasn’t had the money to make repairs or do maintenance. So I suggested that she get an appraisal. She did that, and the appraisal came in at $115,000. (As a bonus, she can appeal her tax assessment using the appraisal; she will save $1000 every year in real estate taxes if she is successful, and she will be.)
Guess what? At $115,000, her equity in the house was $15,000, not $52,000. Since the Bankruptcy Code allows her to keep up to $23,000 equity in her house, she was under the limit, which means she was able to keep her house. And since she didn’t have any extra money to pay to her creditors, she was able to discharge $50,000 of other debt.
Of course, she still has to pay the mortgage payment, but she can write the checks out from her own dining room. House kept.
There are many stories like this, and you have your own circumstances, of course. We would be glad to review your options with you, free, of course. If you want to keep your house, let us look into how we can get it done.