You may be considering filing for bankruptcy but are worried about losing your house if you do.
Whether that happens depends on:
- Are your house payments current, or is your home in foreclosure?
- How much equity do you have in your home? Is it more than the Georgia Homestead Exemption?
- Which type of bankruptcy are you planning to file? Chapter 7 or Chapter 13?
Are Your Mortgage Payments Current?
If your home is in foreclosure, filing for either Chapter 7 or Chapter 13 will stop the collection process when the automatic stay goes into effect the day you file your petition. The stay means all creditor collection efforts must stop. But this will only buy you time. The lender can pursue foreclosure when the automatic stay is lifted at the end of the proceedings.
Meanwhile, a mortgage lender may file a request with the court to lift the stay for the lender and allow the foreclosure proceeding to go forward even while the stay is in effect for other creditors. The trustee is likely to grant this request if the trustee has decided not to sell your home. The trustee’s decision will depend on how much equity you have in the house after the Georgia Homestead Exemption is applied.
If your home is not in foreclosure when you file your bankruptcy petition, it is important for you to continue making your monthly mortgage payments during the bankruptcy process.
The Georgia Homestead Exemption
Although bankruptcy petitions are filed in the U.S. Bankruptcy Court, federal law allows states to make their own laws about what property can be protected from creditors. Some states allow bankruptcy petitioners to choose between federal or state exemptions. In Georgia, you are limited to using the exemptions laid out in the Georgia Code.
The Georgia Code allows you to exempt up to $21,500 of equity in your property if you are a single filer. If you are filing jointly with your spouse, you can exempt $43,000. This means that the trustee has to allow you to keep that much equity in your home.
Trustees do not want to sell the property unless there will be money left from the sale sufficient to pay some creditors. For example, if the trustee sells the home, there must be enough money left over to pay creditors after paying you the amount of the equity exemption and also paying off the mortgage.
Although the exemption may save your home from being sold by the trustee, it cannot save you from foreclosure after the bankruptcy is over.
Saving Your Home by Chapter 7 or Chapter 13 Bankruptcy
Saving your home under Chapter 7. If the Homestead Exemption is sufficient to keep the trustee from selling your home, you still must be concerned about foreclosure after bankruptcy is over. If the home was not in foreclosure prior to filing your petition, you may be able to save enough money due to the discharge of your other debts that you are now able to make your timely mortgage payments.
Saving your home under Chapter 13. Chapter 13 is a process where you reorganize your debts and develop a payment plan for paying them. If you were behind in your mortgage payment and either in foreclosure or headed there, the amount that is in arrears can be added to your payment plan. You can also add the value of the nonexempt equity to your payment plan.
You will repay your debts over a period of from three to five years. Some of your debts will be discharged if you comply with all terms of the payment plan. The caveat is that your income must be sufficient for you to comply with the terms of the repayment plan and to meet all your routine monthly obligations.
No matter which type of bankruptcy you file, if you are able to save your home from sale by the trustee because of the Homestead Exemption, you will still be faced with making monthly mortgage payments after the bankruptcy.
If you are thinking about filing for bankruptcy, contact us at Clark & Washington, PC. We work with you to file your bankruptcy petition as soon as possible to stop your creditors from harassing you and to provide you the relief from debt that you need to get a fresh start under Chapter 7 or to develop a workable repayment plan under Chapter 13. Contact us online or call 770-488-9300 to schedule a free consultation.