The thought of filing for bankruptcy can be frightening. This is because bankruptcy allows the court to confiscate property if a person or organization cannot cover their unpaid debts. Therefore, if you’re contemplating filing for Chapter 7 bankruptcy, you may be wondering whether you’ll be able to keep your home.
If you file for Chapter 7 bankruptcy, you may be able to discharge all your debts by liquidating your assets. However, you don’t have to sell all your assets, and you may still be able to keep your home if you’re current with your mortgage payments.
In what ways can Chapter 7 bankruptcy can protect your home?
Through the automatic stay
If you’re facing foreclosure, filing Chapter 7 bankruptcy will put an automatic stay, preventing any foreclosure action. Regardless of how far behind you’re on your mortgage payments, the automatic stay will prevent lenders from:
- Collection harassment
- Foreclosing on your home
- Sending acceleration notices
The automatic stay may provide temporary relief but can’t help you keep your home. Therefore, if you fail to make your monthly loan payments, the lender may go to court and request permission to bypass the automatic stay.
Through a homestead exemption
You may be able to keep your home when filing for Chapter 7 bankruptcy by applying for a homestead exemption. Usually, this may be possible if you don’t have too much equity in the property. In Georgia, you may exempt up to $21,500 of your equity or double the amount if you’re married.
Your home obviously has a higher market value, and you may not see the homestead exemption as a viable way to protect it. However, a bankruptcy trustee may not focus on selling your house if it doesn’t have equity.
If you’re current on your mortgage but struggling to pay all your bills, filing Chapter 7 bankruptcy may help you clear all your other debts. This will leave you with more money that you can use to pay for your house.