One of the most common concerns New York residents have if they are in debt is if they can keep their house during bankruptcy. So, if you are filing for bankruptcy as a homeowner, you will need to know how bankruptcy can affect your mortgage and whether or not bankruptcy allows you to keep your home.
At Grady BK, PLLC, we work with our New York clients one-on-one, helping them to protect their home during bankruptcy and find the best bankruptcy option. We understand how overwhelming this decision is, which is why we will provide clarity so that you know exactly what to expect when you move forward. In this article, we will discuss whether or not you can keep your home during bankruptcy and how Chapter 7 vs Chapter 13 affect homeowners.
How Does Chapter 7 Affect Your Home?
Chapter 7 bankruptcy is a bankruptcy option that allows you to have all of your dischargeable debts discharged in as little as a few months. This means that these debts are no longer your responsibility, which can usually make your necessary living expenses and non-dischargeable debts more manageable.
The good news is that Chapter 7 also means that you may be able to keep your home if it is considered to be an exempt asset. Usually, a home will be considered exempt if the equity falls within the limits of the homestead exemption in New York. However, if your home’s equity exceeds the exemption, you may need to consider Chapter 13 bankruptcy.
How Does Chapter 13 Affect Your Home?
Unlike Chapter 7 bankruptcy, Chapter 13 is a repayment plan type of bankruptcy that put you on a 3 to 5 year repayment plan. This allows you to have a more realistic monthly payment that can slowly pay off your debts. If, at the end of your repayment plan, you have any remaining dischargeable debts, Chapter 13 will usually discharge these.
Additionally, Chapter 13 bankruptcy is one of the best options for allowing homeowners to keep their homes in almost all circumstances. This includes situations where you may have non-exempt equity or mortgage arrears.
What Is the New York Homestead Exemption?
The important thing to understand about bankruptcy and homeownership is that bankruptcy isn’t looking at what your property is worth overall. Instead, it is looking at the equity of your property, which is the value of your home minus what you owe on it. And the purpose of an exemption is to protect that equity from your creditors.
New York’s homestead exemption protects up to $204,825 of equity in your primary residence. Keep in mind that this amount can vary slightly depending on where you are living in New York. And if you are a married couple that co-owns the property, you can double this protection when you file jointly.
Can Bankruptcy Stop Foreclosure?
When you first file for bankruptcy, an automatic stay is put into place, which protects you from all collection efforts, including foreclosure proceedings. And in most situations where you are filing for Chapter 13, this can stop foreclosure indefinitely.
However, if you’re filing for Chapter 7, this doesn’t necessarily mean you have complete foreclosure protection. To stop foreclosure permanently, you will need to pay the amount of mortgage that you are behind on.
Common Mistakes Homeowners Should Avoid
Although the bankruptcy process is relatively straightforward, even for homeowners, it does come with some challenges. Here are some examples of mistakes that homeowners should avoid making so that the bankruptcy process moves smoothly and you are able to protect your home:
- Poor disclosure: When filing for bankruptcy, it’s essential that you accurately disclose all of your assets; otherwise, you risk having your case denied.
- Waiting too long: Although bankruptcy’s automatic stay can protect you from foreclosure proceedings, you need to begin this process as soon as possible. If foreclosure has already begun and has gone on for quite some time, the automatic stay may not be enough protection.
- Choosing the wrong bankruptcy: Homeowners also need to be especially careful when choosing the type of bankruptcy they file for so that they don’t run into lengthy delays. When you work with a bankruptcy attorney in New York, they can help you understand what your options are and which ones you qualify for.
FAQ Section
Will filing bankruptcy automatically cause me to lose my house?
No, in fact, most people filing for bankruptcy can keep their home.
How much home equity can I protect in New York?
You can usually protect up to $204,825 equity in your home, depending on what part of New York you live in.
Can Chapter 13 help me save my home from foreclosure?
Yes. The automatic stay will stop foreclosure proceedings, and anything you owe on your mortgage will be added to your Chapter 13 repayment plan.
What if I’m behind on my mortgage payments?
If you file for Chapter 13, past-due mortgage payments will be added in to your repayment plan. But if you file for Chapter 7, you will need to find a way to pay back your late mortgage payments in order to stop for closure.
New York’s Top Compassionate Bankruptcy Attorney
If one of your goals is to save your house during bankruptcy, you will need to know how bankruptcy treats homeowners. At Grady BK, PLLC, we can help you decide on the best type of bankruptcy for your situation and can help you get the process started. Having a bankruptcy lawyer on your side can help you proceed with confidence, especially if your goal is to keep your home after bankruptcy.
At Grady BK, PLLC, we take the approach of treating each of our clients as though they were our only client so that you get the individualized attention that you need. And if you have any questions or concerns at any point during this process, we are here to help.
Contact us today at 315-299-9005 to discuss your financial situation with a bankruptcy attorney in New York. Our team at Grady BK, PLLC, is here to help you get the process started so that you can have a brighter financial future.
