If you find yourself crushed by a mountain of debt, filing bankruptcy could provide you the financial relief you need. Yet, you may wonder whether it is the right option for you, since you may fear you could lose your home during proceedings. Like many people who file bankruptcy, you may worry that there is no way to prevent your home from entering your case. While you can likely protect it, your options for doing so will depend on how much equity you have in it, whether you are current on your mortgage payments and which chapter of bankruptcy you file.
Protecting your home in Chapter 7 bankruptcy
Your ability to protect your home after filing Chapter 7 bankruptcy will depend on the amount of equity you have in it. Equity, in the case of your home, is the difference between its current market value and your remaining mortgage balance. To keep your home, your equity in it must not exceed the homestead exemption set forth in North Carolina’s bankruptcy code. With this exemption, if you are under age 65, you can protect up to $35,000 of equity in your home. If you are age 65 or older, this rises to $60,000.
Even if the equity in your home does not exceed the state’s homestead exemption, your ability to keep it may depend on whether you are current on your mortgage payments. You could still lose your home if you are behind on these, or if you cannot afford them once your other debts are discharged.
Protecting your home in Chapter 13 bankruptcy
You will have an easier time protecting your home if you file Chapter 13 bankruptcy than if you file Chapter 7 bankruptcy. This is because you will satisfy your debts – including your mortgage – through a repayment plan, which will last between three and five years. So long as you adhere to the terms of your plan, you will likely be able to keep your home, whether you are current on your mortgage or are in arrears. Yet, you could still lose it if you fail to make your mortgage payments – or make up your past-due payments – during this time.
No matter which chapter of bankruptcy you file, you may have a way to keep your home. With the help of an attorney, you can determine whether it is feasible to protect it in your situation.
