For most people, the top reason to delay filing for bankruptcy is the fear of losing their homes. Though that certainly happens to some, many people are able to avoid this fate. It all comes down to what you own and what you owe, and a lot will depend on the bankruptcy chapter you file under. Other factors include your state’s rules regarding exemptions and the amount of equity you have in your home. The best way to find out if you’ll be able to protect the things most important to you is to consult with an experienced bankruptcy attorney before you begin the process.

Among the first questions that your attorney will ask will be what assets you have, how much money you make, how much you owe, and whether you’re current on your mortgage payments. The answers to these questions will help determine whether you’re eligible for a Chapter 7 bankruptcy or whether your income is too high and you need to use Chapter 13. While Chapter 7 discharges most of your debts, Chapter 13 is meant to help you stay in your home: it frequently results in revised mortgage terms and reorganizes your other debts, giving you more time to pay them off.

One helpful tool is the homestead exemption. This is an aspect of the bankruptcy process that changes from state to state, but which combines with your equity in your home to provide you with a bit of a boost on what you’re able to protect from being liquidated in a Chapter 7 bankruptcy. There is a federal exemption, and each state also has its own exemption. Some states allow you to use both their exemption and the federal one, while others limit you to what they allow. To apply the exemption to your home, you must have lived there for 40 months. Another possibility is to skip bankruptcy entirely and negotiate a mortgage modification with your lender.

Remember that though bankruptcy is not a ticket to getting relieved of your mortgage responsibilities, the bankruptcy process also isn’t meant to punish you. The goal is to put you back on your feet, eliminating as much of your debt as possible using the assets that you own, while still preserving some aspects of your living standard. Working to preserve your ownership of your home won’t make sense if you’re still not going to be able to afford to pay your mortgage after your other debts have been discharged.

For details on how our bankruptcy attorneys can help you hold on to your home, contact us today.