How to File Chapter 7 Bankruptcy and Keep Your House

How to file Chapter 7 bankruptcy and keep your house; is it possible? In a word - maybe. But, if keeping your house is a priority as you make decisions about potential bankruptcy you may want to consider alternatives such as Chapter 13 bankruptcy. Either way, successfully navigating a bankruptcy is complex and you will achieve the best possible outcome if you retain an experienced attorney who can fully advise you on your best options given your personal situation.

Basics

Chapter 7 bankruptcy is a court ordered proceeding where an appointed trustee sells all of your assets except certain exempt assets in order to pay your debts. Exempt assets, the ones you may be allowed to keep in Chapter 7 bankruptcy include household appliances, necessary household goods, and a portion of the equity in your house.

Homestead Exemption

This exemption of a portion of the equity in your home is known as a "homestead" exemption. The value of the exemption according to Federal Bankruptcy Code can be no more than $125,000 however the Federal Bankruptcy Code allows individual states and the District of Columbia to set their own value on the homestead exemption. The homestead exemptions, or that portion of the equity in your house that you can keep under Chapter 7 bankruptcy varies widely from state to state and the individual states can make their own decisions about whether you are only allowed to use their values, only the Federal value or if you can pick.

State Differences

How to file Chapter 7 bankruptcy and keep your house depends on where you live, but don't up and move to a state with more generous equity rules because you have to have lived in your current state for at least 2 years or you must file bankruptcy in the state where you have mostly lived for a period of time prior to filing the bankruptcy. In short, if you live in Georgia, only $5,000 of equity in your house is exempt from Chapter 7 liquidation; in Kansas up to $125,000 in equity is exempt. So, if you have $75,000 in equity in your house and you live in Georgia you are more likely to lose your house to Chapter 7 liquidation.

Always Get Legal Advice

Consult as soon as you possibly can with an experienced bankruptcy attorney. They know how to file Chapter 7 bankruptcy and more importantly can help you find alternatives that may allow you to keep your house in bankruptcy.