Real Estate And Bankruptcy | What You Can Keep And What You Can't
Filing for bankruptcy can discharge unsecured debts and help you regain financial stability. If you own real estate, you may wonder whether you will be forced to give it up during the bankruptcy proceedings. Consulting with a bankruptcy attorney is crucial, but this guide will give you an overview of what you can expect to keep and what you may need to give up.
Type of Bankruptcy
The main factor that determines whether you can keep your property is the type of bankruptcy you're filing. Here's what you need to know.
Chapter 7
If you're filing for Chapter 7, which involves liquidating assets to pay off creditors, you may need to relinquish your property. However, each state has its own set of exemptions, which can help protect certain property types. If the equity in your home is below the exemption limit, your bankruptcy attorney may be able to help you retain the property.
Chapter 13
On the other hand, if your bankruptcy attorney recommends filing for Chapter 13, which involves a debt repayment plan, you will likely be able to keep your property. This is because you're not required to sell your assets to pay off creditors. However, your payment plan will be based on your disposable income after living expenses and secured debts, like mortgage payments. In other words, the court-determined payments need to fit into your new budget.
Type of Property
Another factor that affects whether you can keep your property is the type of property you own. While the type of bankruptcy you file affects whether or not you can keep your primary residence, it may have a different effect on other properties you own.
Second or Vacation Home
If you own a second or vacation home, you may need to relinquish it regardless of whether you file for Chapter 7 or Chapter 13. This is because owning a second or vacation home is not a necessity. Therefore, the court may decide to liquidate that property to help pay off your creditors.
Investment or Rental Property
On the other hand, if you own an investment or rental property, you may be able to keep it in either Chapter 7 or Chapter 13. This is because owning rental properties can generate income and be used as a source of revenue. However, if you are in Chapter 7, your bankruptcy attorney may need to argue that the property is exempt. If the property is a buy-and-hold venture and does not generate income, you may be forced to sell it to help pay off any creditors.
Filing for bankruptcy doesn't necessarily mean losing your real estate holdings. The type of bankruptcy you're filing and the nature of your property will determine what you can keep and what you can't. However, with the help of an experienced bankruptcy lawyer, you can work to protect your assets and regain your financial footing.
Contact a local bankruptcy attorney for more info.
Share