Can I Keep My House in a Chapter 7
Can I keep my house in a Chapter 7 bankruptcy? Bankruptcy is a legal process that an individual may seek when they need relief or help with managing their debt because they are unable to make payments. This individual is known as the debtor because they owe a debt, and the person or entity that allowed the debtor to borrow money is known as the creditor. The debtor usually owes a substantial amount, but their debt does not necessarily have to be substantial because there is no minimum amount of debt required in order to file for bankruptcy.
There are different types of bankruptcy that the debtor can choose from, but one of the most common types is a Chapter 7 bankruptcy. This type of bankruptcy in Millbrook can usually be completed within four to six months, and it can be filed by individuals or business entities that have unsecured debt depending on their income. Chapter 7 bankruptcies place a temporary stay on the debtor’s debt to where creditors cannot continue to collect or act on that debt. For example, creditors will have to stop collecting payments, and they will not be able to repossess or foreclose on any of the debtor’s properties once the debtor has filed for Chapter 7 bankruptcy.
A Chapter 7 bankruptcy can be distinguished by its liquidation process, which consists of selling the debtor’s assets in order to relieve some or all of their debt. The debtor’s assets will be divided into two categories: exempt and non-exempt. Exempt assets are items that will not be sold during the bankruptcy, and they are usually assets that the debtor needs to live and work on a day-to-day basis. Exempt assets include items like clothing, furniture, and appliances. However, these items will only be exempt to the extent that is reasonably necessary. Non-exempt assets are items that will automatically be included in the liquidation process, and these assets typically include items like cash, bank accounts, and investments. Our Prattville bankruptcy attorney can help counsel you on whether your property will be an issue in a potential case.
A debtor can generally keep their house in a Chapter 7 bankruptcy by getting it exempted. However, exemption depends on the circumstances like which state the debtor lives in. If the debtor’s equity in their home is less than their state’s exemption, they will likely get to keep their home. But, if they have more equity in their home than the exemptions allow, they may have to sell their home. Alabama gives individual debtors around $16,000 for home exemptions. It may also depend on whether the debtor is current on their mortgage payments. If the debtor owns multiple homes, then their additional homes will be sold during the liquidation process.
In a Chapter 7 bankruptcy, a third party, known as the bankruptcy trustee, will be appointed by the court to oversee the entire liquidation process. The bankruptcy trustee will gather the debtor’s assets, organize the sale of those assets, and collect the proceeds from that sale. Then, the trustee will use these proceeds, in the form of cash, to pay the debtor’s creditors. Once this is completed, the debtor will receive a court order that forgives or discharges their debt to where they no longer have any obligation to their creditors. If you are considering bankruptcy, schedule a consultation with one of our experienced bankruptcy attorneys in Montgomery to determine which type of bankruptcy would be best for you and your property.
Attorney Steven A. Harris regularly blogs in the areas of family law, bankruptcy, and real estate closings on this website. He is always available in any of the firm’s offices or by phone anytime for a consultation. Mr. Harris tries to provide informative information to the public in easily digestible formats. Hopefully you enjoyed this article and feel free to supply any feedback. We appreciate our readers and love to hear from you!
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