Keep Your House in Chapter 7 Bankruptcy
This article is about keeping your house in a chapter 7 Bankruptcy. When most people hear “chapter 7” and “Bankruptcy” they INCORRECTLY think: “I’m going to lose everything. And definitely my house.”
This blog explains how to keep your house in a chapter 7 Bankruptcy.
In this blog, I use “house” to mean “RESIDENCE.”
Below is a step-by-step guide to KEEPING YOUR HOUSE in a Chapter 7 Bankruptcy:
Step 1: Protecting/Exempting your house from the Trustee
Chapter 7 Bankruptcy Trustees look for unprotected/unexempt assets that have equity to sell for the benefit of your creditors. Thus, the first step is protecting/exempting the equity in your house from the Chapter 7 Bankruptcy Trustee.
Ask yourself: Is my house worth more than what I owe on it (i.e. does it have equity)?
If NO, then you probably don’t have to worry about the Chapter 7 Bankruptcy Trustee having an interest in your house (because it has no equity).
If YES, know that Ohio Law (read it for yourself: Ohio Revised Code Section 2329.66(A)(1)(a)) allows you to protect/exempt from the Bankruptcy up to $136,925* of equity in real property which you use a residence.
For example: If your house is worth $250,000 with a $130,000 mortgage = $120,000 equity. By applying the Ohio Homestead exemption of $136,925*, you protect/exempt the entire $120,000 of equity in your house! This means your house is protected/exempted from the Bankruptcy Trustee, and you are still eligible to eliminate all your other debts! Incredible.
Step 2: Maintain Good-Standing with the Mortgage Company
Once you have protected/exempted your house from the Trustee, the second step to keeping your house in a chapter 7 Bankruptcy is to ensure the mortgage company IS happy, and REMAINS happy. Mortgage companies are kept happy by being current on your monthly mortgage payments. A good saying to remember when entering a chapter 7 Bankruptcy with the intent of keeping your house: “Be current on the mortgage when you file, and remain current after you file.” In my experience, if you abide by that saying, the mortgage company is likely to issue a Reaffirmation Agreement (I will write a blog about reaffirmation agreements shortly) which will allow you to keep the house in the same status as it was prior to the Bankruptcy filing.
As many of my Bankruptcy Blogs state: The general public is severely misinformed about how Bankruptcy works. To an extent, that’s fine, because that’s why Bankruptcy attorneys, like myself, exist. But, sometimes the misconceptions prevent the general public from even consulting with a Bankruptcy attorney; because they assume they already know the answer. And that is where the misconceptions become a problem.
Don’t assume things about Bankruptcy; contact me, Bankruptcy Attorney Lucas Ruffing, for a FREE consultation. Call/Text 740-815-1114 to reach me directly.
I look forward to answering your questions!
*Ohio Homestead exemption amount is accurate as of 10/18/2018. Contact a bankruptcy attorney for updates.