Will I Lose My Property if I File for Bankruptcy in California?
One of the biggest concerns for anyone struggling with debt is whether they might lose their house. Especially when considering bankruptcy, clients often ask whether they might lose their home and other valued personal property. California and federal bankruptcy laws, however, provide exemptions for many types of personal and real property. With the advice of a careful, experienced, California debt relief attorney, you can get relief from bankruptcy while still retaining the property that matters most to you.
Under Chapter 13, You Keep All Your Property
Chapter 13 bankruptcy involves working out a payment plan to repay your debts over a three to five-year period. You keep all of your property, whether it would be exempt or not. You will still need to pay your secured creditors an amount equal to your nonexempt property, or your disposable income, whichever is more, over the repayment period. The more nonexempt property you keep will increase the amount you owe in your repayment plan, but you will likely get to keep your house.
Even Under Chapter 7, a Lot of Property is Protected
Chapter 7 bankruptcy involves potentially liquidating your assets to pay off some of your debt and have the rest forgiven. Your non-exempt assets could potentially be sold off in order to pay your creditors. There are, however, exemptions that cover many types of property. Chapter 7 filers are often pleasantly surprised at the amount of property they can keep while still benefiting from the debt discharge. An experienced bankruptcy lawyer can help you with pre-bankruptcy strategies resulting in most Chapter 7 filers keeping all of their property.
While the bankruptcy trustee could sell your home to pay your creditors, if you have little or no equity in your home, they are unlikely to do so. California’s Homestead Exemption protects your home’s equity up to a certain point. It is important to determine how much equity in your home is exempt and how much is not, with the help of a California bankruptcy lawyer.
If you are current on your mortgage payments, you are likely to keep your home, even when you file for Chapter 7. If you are behind on your payments, however, you could potentially lose the home. Chapter 7 bankruptcy does not wipe out your mortgage lien. Your mortgage lender can likely foreclose on your property if you fall 90 days or more behind on your mortgage. Chapter 7 bankruptcy homestead exemptions, however, allow you to exempt up to $175,000 of equity in your home (dependent on certain factors) thereby protecting your property from liquidation by the bankruptcy trustee.
Depending on your circumstances, it may be worthwhile to let your home be sold. If you owe more than the home is worth, or if it would be cheaper to rent a comparable property, it might be worth letting it go. Speak with your California debt relief lawyer about your best options for relief.
Talk to a Knowledgeable Southern California Bankruptcy Attorney
If you’re struggling with debt and considering bankruptcy, please contact Rounds & Sutter for a free, confidential consultation. With offices in Ventura, Santa Barbara and Westlake Village, we represent clients throughout Southern California, offering smart, compassionate legal counsel in the face of life’s challenges.