Can I Keep My House

CAN I KEEP MY HOUSE IN A CHAPTER 7 BANKRUPTCY?

Chapter 7 stops or “stays” any foreclosure action. You can keep your house if there is little equity.

ANSWER: Does it have any equity the trustee can make use of in a forced bankruptcy sale? Does it have 15% equity or more?

For example: You own a house worth $300,000 but you have a mortgage on it for $275,000. If the trustee were to sell it and account for $30,000 (10% sales costs) it would leave no money to pay off the creditors. So your real estate is not an asset to the bankruptcy estate and the trustee would let it pass through the case, and you stay in the house if you can still make the payments.      

How does the trustee determine value?

They use Zillow in the DC area for current values; they also will see your tax assessment and when you bought it. Comparable sales are important and they will look at similar homes in your community and recent sales of similar properties. Look at your property and do the math.

If the house is foreclosed, how much time do I have to stay?

At least during the bankruptcy (100 days) but often much longer.

Do I keep paying my mortgage during and after filing?

Yes, if you want to stay and keep the home. Since the lender has a secured claim, they are protected, and you no longer owe on the original loan for it has been discharged. Keep paying them as usual and the property becomes yours when the original mortgage balance is paid.

What if we are married and my spouse is not filing?

In Virginia we have “Tenants by the Entirety”. That simply means the marriage owns the property, not the individuals. In some circumstances you can protect the full equity if the married couple has totally separate debts and only one party is filing. This takes work as each debt needs to be determined that it is not a shared debt.

Homestead deed can protect up to $10,000 in equity

Each filer is entitled to a $5,000 exemption and $10,000 if married; this exemption is a one-time-only Virginia state exemption.