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Q.Can I keep my Home if I File for bankruptcy?
A.The answer depends on three factors: (1) the state in which you reside (live) and the equity exemption allowed in that state; (2) the status of your mortgage or loan on your home (current or in foreclosure); and (3) the type of bankruptcy you file (Chapter 13 provides more protection than Chapter 7 so long as your mortgage payments are current).
In a Chapter 7 Bankruptcy, the homestead exemption determines how much equity in a home you can keep when filing for Chapter 7 bankruptcy. The bankruptcy trustee will only have an economic incentive to sell your home if the home has enough equity to pay all of the outstanding mortgage(s) in full, brokers commissions, other costs of sale and whatever exemption has been claimed to protect the residence (e.g., homestead exemption, wildcard exemption, other unpaid liens on the home) and still leave a balance of at least $5,000 for the bankruptcy estate.
The Homestead Exemption amounts vary widely from state to state, and are not available to recent state residents. Under the new bankruptcy law, if you have recently moved to another state and find yourself facing the possibility of bankruptcy, you cannot take advantage of the new state's homestead exemption unless you have lived there for at least 2 years (California).
If you own a home and are contemplating filing for bankruptcy you should have a real estate agent or broker come by your home and give you a realistic valuation of your property along with comparables in your neighborhood.
In California, if you file under California Code of Civil Procedure Section 704, you should be able to keep your home if:
- You are single and the equity in your home is less than $50,000
- You are married and the equity in your home is less than $75,000
- You are 65 years of age or older and the equity in your home is less than $125,000
- You are 55 years of age and earned less than $15,000 and the equity in your home is less than $100,000
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