Can You Keep Your House After Filing Chapter 7 Bankruptcy in the State of Indiana?
Many people see bankruptcy as a stranger taking over their lives and selling everything that they own except for a few possessions that will fit in a cardboard box. Then, they think they get to take that cardboard box and start over. This is not the case in most circumstances. In many cases, in Indiana, you will be able to keep your home after filing for Chapter 7 bankruptcy protection.
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If you Owe More than your Home is Worth
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If you owe more on the mortgage than the home is worth, the bankruptcy trustee is not interested in taking it. The home is secured property and can not be sold without paying off any mortgages. Therefore, there will be no money left over to pay creditors after the sale. You would still need to make the payments on any loans that the property secures to keep the house.
If you Have Equity
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Equity in your home is an asset, and the bankruptcy trustee can take assets that are not exempt to sell and pay the money to your creditors. The state of Indiana allows you to exempt home equity of up to $146,450 as of April 10, 2010. If you have home equity up to but not exceeding that amount, the bankruptcy trustee can not force you to sell your home and turn over the equity.
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House Payment Amount
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If your house payment is higher than the average for your area, the trustee could consider this to be a luxury. This could pose a problem especially if you have a higher income than average. The trustee could determine that if your house were sold, and you found a less expensive place to live, you would have money left over to fund a Chapter 13 repayment plan for your creditors. This is an unusual situation, and at the worst would probably cause you to file a Chapter 13 bankruptcy, keeping your mortgage as part of the repayment plan.
Considerations and Potential Problems
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You probably would need a higher amount of equity than $146,450 before the trustee would force the sale of your home. The costs to sell your home would be subtracted from the proceeds of the sale. You would have to be paid the exemption amount, and anything left over would go to the creditors. The costs of the sale could be significant. Also, many people use the tax valuation of the house to set the value. If you live in an area where property values have dropped significantly, the appraised value could be much less than the tax valuation. Consider having an appraisal performed to establish value.
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References
- Photo Credit House for sale image by fejas from Fotolia.com
