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Can one keep their home after filing for bankruptcy?

Filing for bankruptcy is a big decision, and people in Tennessee contemplating it often have many questions. One of their primary concerns may be what happens to their house. Will they be able to keep their home after filing for bankruptcy?

When a person files for Chapter 7 bankruptcy, their assets are liquidated, that is, sold off, and the proceeds used to cover at least some of the person's debts, some of which will then be extinguished. It is an option for people who simply do not have the financial resources to pay off their debts.

There are property exemptions to the Chapter 7 liquidation process. Certain assets, including a house may be exempted from liquidation, depending on how much these assets are worth.

Each state sets its own exemption amount, but in general, an asset with equity that is less than the state exemption amount will not be subject to liquidation. For example, if the exemption amount in a state is set at $150,000, if a person's home only has $100,000 in equity, it would not be subject to liquidation. However, if a person's home had $175,000 in equity, then it would be subject to liquidation.

A Chapter 13 bankruptcy differs from a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, debtors will enter into a court-approved repayment plan that will last for either three or five years, allowing the debtor to repay his or her debts over time. In a Chapter 13 bankruptcy, if a debtor continues to make payments on time, he or she will not lose his or her home.

The point of bankruptcy is to allow people to rebuild their lives, and being able to keep one's home is part of this goal. Those who have further questions about what will happen to their home should they file for bankruptcy may want to consult with an attorney, as this post is for informational purposes only and cannot guarantee any specific result.

Source: The Washington Post, "What happens to your property when you file for bankruptcy?," Jonnelle Marte, July 26, 2016

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

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