As someone considering filing for bankruptcy in an attempt to get your finances under better control, you may study up on the process and try to separate fact from fiction along the way. Regrettably, a lot of misinformation exists when it comes to the bankruptcy process, and many Americans struggle to understand exactly what the process involves and how it can impact their lives.
Often, one of the first questions people ask when considering filing for bankruptcy is whether they will lose their home after filing. Unfortunately, there is no simple, one-size-fits-all answer to this query, but you can do some things to get a better idea of what you are up against. The first thing that factors in when determining whether you can keep your house after bankruptcy is whether you pursue a Chapter 7 or a Chapter 13 filing.
Chapter 7 bankruptcies
Chapter 7 bankruptcies are generally meant for lower-income Americans unable to pay off their debts within a reasonable timeframe. If you move forward with a Chapter 7 bankruptcy filing, some of your property may be eligible for seizure, while some of it typically will not. Whether your house falls into the “available for seizure” category will depend on its worth and how that value compares to the exemption amount currently allowed by the state of Illinois. If the equity you have in your home is lower than Illinois’ exemption amount, you can typically keep your home, while if it is higher, you likely cannot.
Chapter 13 bankruptcies
If you do not meet the income requirements necessary for a Chapter 7 bankruptcy, you may decide to move forward with a Chapter 13 filing. This type of bankruptcy is quite different from a Chapter 7 filing. It typically involves you establishing a payment plan and paying back at least some percentage of the debts you owe. As long as you stay current on the terms of your payback plan and otherwise keep up with your mortgage, you can generally hang on to your home after a Chapter 13 filing.
Bankruptcy is a serious step that warrants careful consideration, but it just may give you the fresh financial start you need to dig yourself out of debt for good.