As a Newnan, Georgia bankruptcy lawyer, I review the potential bankruptcy consequences of home ownership almost everyday. The considerations can be numerous, but here are a few of the basic principals for determining whether you could lose your home by filing bankruptcy.
You most certainly can lose your house by filing a bankruptcy case – specifically by filing a chapter 7 bankruptcy case. The reality is that most people who file a chapter 7 case will not lose their home. The Georgia Bankruptcy Exemptions allow you to have up to $10,000 of equity in your home ($20,000 if you are married). If the amount you owe on your home, plus the exemptions added together is equal too or more than the value of your home, then chances are slim you would lose your home by filing a chapter 7 bankruptcy case.
The analysis get’s tougher when the amount you owe on your home plus your exemption is less than the value of your home. If the bankruptcy trustee has to pay costs to sell a home just as anyone else would. Therefore, they would have to be considered as well.
For the past few years, homes values in Newnan, Georgia and surrounding counties have lost so much value; there is often little or no equity, especially if the home was purchased in the last 10 years. For those homes where value and possible equity is a concern, I will often have a real estate agent provide a Broker Price Opinion. A Broker Price Opinion is a formal opinion of a homes value by a local real estate agent. Often this information, is enough to help us decide whether to move forward or not with a Chapter 7 bankruptcy case.
If it is clear that enough equity exists beyond the bankruptcy exemption, then I often advise clients to consider a chapter 13 bankruptcy case. Chapter 13 bankruptcy cases do not require that homes be sold to pay back creditors. Another option is to pay the trustee some money so that he doesn’t have to sell the home. Clients sometimes borrow money from family or friends or even their 401k to get enough cash to give to the trustee in lieu of the trustee selling the home.
Regardless, whether you file a chapter 13 or chapter 7 bankruptcy case, it’s imperative that you continue to pay for your home in order to keep it. There is no kind of bankruptcy that will allow you to keep a home if you can’t continue to make the payments.