Overwhelming debt has struck many Indiana residents. You may be struggling with high medical bills, out of control credit card debt or be behind on your mortgage payments after losing your job.
In the past, filing for bankruptcy was seen as a sign of failure. Times have changed. Today, bankruptcy is widely recognized as a smart option to help you get out of debt and start over financially.
Chapter 7 bankruptcies
Even if you’ve determined that bankruptcy is the right choice for you, you might hesitate to file because you do not want to lose your house. A common misconception is that filing for bankruptcy means you lose your home.
There are various ways you can keep your house even if you file for bankruptcy. If you file a Chapter 7 bankruptcy, the court will examine how much equity you have in your house.
What is equity?
To determine the equity on your home, start with the fair market value of your home and then subtract the amount you still owe on your mortgage. For example, if your house is worth $100,000 and you owe $50,000 on your mortgage, you have $50,000 worth of equity in your house.
Having little to no equity is to your advantage in a bankruptcy situation. If you have too much equity, the bankruptcy court could force you to sell your home to pay your debts.
If you have no equity, and no other way to pay your debts, could allow you to file for a Chapter 7 bankruptcy and keep your house. You would have to show that you could continue to make your monthly mortgage payments after bankruptcy.
Contacting your mortgage company and letting them know about your situation can help. They can work with you on potentially negotiating new or different mortgage payments if you need them.
Chapter 13 bankruptcies
A Chapter 13 bankruptcy involves setting up a payment plan to pay off your debts. The court will still examine the equity in your home, but Chapter 13 bankruptcies are designed for people who want to keep their home.
Overall, the good news is that yes, there are definitely ways to file for bankruptcy and keep your house. The bankruptcy rules are complex, and following every step correctly is crucial. It is best to have professional guidance through the process.