How to Protect Your Home in Bankruptcy
As is the case with most people in the United States, your home likely is your most significant financial and personal investment. If your debt situation reaches a point where bankruptcy appears to be your best option, know how to protect your home in bankruptcy.
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Instructions
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Determine which type of bankruptcy makes the most sense for you. A Chapter 7 bankruptcy is designed to allow the discharge (elimination) of most of your debts. A Chapter 13 bankruptcy permits you to pay off the bulk of your debts through a repayment plan overseen by the court.
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Obtain and fill out a bankruptcy petition from the bankruptcy court clerk, either from the office of the clerk or (in most jurisdictions) from the website maintained by the bankruptcy court.
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Claim your home as exempt property. The bankruptcy petition contains a section in which you list all exempt property. In a bankruptcy case, the definition of exempt property is determined by the state law in the jurisdiction where the particular bankruptcy court is located. All states permit an exemption for homesteads. However, there is variation from one state to another as to limits on the value of the residence claimed as exempt. Typically a bankruptcy court clerk makes available a summary of permissible exemptions.
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Include the names of all your creditors on the matrix (master list) of creditors, including your home mortgage lender.
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File the petition with the bankruptcy court clerk.
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Contact the home mortgage lender following the filing of the bankruptcy case and inform it that you desire to enter into a reaffirmation agreement. A reaffirmation is somewhat like a loan modification; through a reaffirmation agreement, you and the mortgage lender agree that you retain possession of the residence and will make mortgage payments into the future pursuant to the terms and conditions agreed upon in the reaffirmation document.
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Tips & Warnings
Bankruptcy cases can be complex legal matters. Consider engaging the services of a bankruptcy attorney to represent you. Although these organizations cannot recommend specific attorneys, both the state and local bar associations maintain directories of attorneys in different practice areas, including bankruptcy law. Contact information for these groups is available from the American Bar Association.
