How Bankruptcy Handles Homes Retention?
Law office of Malik Ahmad offers free consultation to prospective bankruptcy clients]
This is almost a continuous question as each of my client asks this invariably every time they meet me and of course on a non stop basis. “Can I keep my home”?
Of course, you can keep you home, if you file Chapter 7 bankruptcy or Chapter 13. Home is an exempted property, especially if you have filed homestead under Nevada laws. But this retention is temporary until the opposing lender’s counsel request a motion to lift stay. Invariable, the opposing counsel files a motion to lift stay and invariable it is accepted. Now, you are back to square one and is open to these vultures again, subject of course again, to foreclosure.
Rule No. 1
Do you wish you keep your home? Are you able to pay the mortgage and continue with the pre bankruptcy obligation? If that is the case, you can keep the home. You may down the road request loan modification, but that is a different case. First, if you wish to keep your home, you’re going to have to be able to pay the mortgage. You have three choices after you file the bankruptcy.
-You can surrender the property and have no obligations to pay anyone.
-You can reaffirm the debt, and continue making the payments and still like to assure your lender that such payments would be made as agreed before.
-However, sometimes, when a homeowner is already underwater on their first mortgage, a second or third mortgage can be modified or stripped under Chapter 13.
Rule No. 2.
Let us say you can afford your mortgage, the bankruptcy process would let you keep the home via Nevada exemption. In Nevada, the homestead exemption is $550,000. If you have equity up to $550,000, you can keep your home and safeguard against creditors. A home is at risk of being liquidated in a chapter 7 bankruptcy in Nevada only if there when there is non-exempt equity which exceeds the amount allowed to be protected under Nevada state or federal law. Again, we mean primary home here.
1. Again in Nevada, it is not uncommon to file a chapter 7, AND NOT REAFFIRM ON THE HOUSE, thus discharging the debtor’s personal liability, but continue to make the house payments and continue to live in the house. The advantage to this, from the debtor’s view, is that if the debtor later is unable to pay for the house, the creditor can repossess it through foreclosure, but the personal liability of the debtor is extinguished and down the road the lender cannot come back and sue for deficiency.
2. That takes care of the deficiency issue in Nevada. We have heard of this omnipresent issue all the time, and a bankruptcy resolves this lingering issue.