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How your home factors in to the Chapter 7 equation

It is perfectly natural for any person in a desperate financial situation to consider bankruptcy. One of the first questions they are likely to consider is "how will this filing affect my home?" There are a few things to consider here, specifically in regards to a Chapter 7 bankruptcy filing.

First things first, do not assume that your bankruptcy filing automatically means you will not be able to keep your home. At the same time, there is no guarantee that your home will be protected because of the bankruptcy process. Every case is different, and there can be unique elements at play that tip the scales to either side of the home debate. With that in mind, you will want an attorney on your side to protect your interests and give you the advice and information you need to make an informed decision about your bankruptcy filing.

Like any bankruptcy, a Chapter 7 filing will result in a trustee being appointed to your case. The filing usually takes a few months, at least, to complete; but there are examples where the bankruptcy takes longer than usual. This could be a result of the trustee extending your bankruptcy to see if your home value will reach a point where it can be liquidated, and thus pay off your creditors.

With that in mind, it's important to know that at the moment of your Chapter 7 filing, your finances will be looked over. But your finances are not stagnant; and the trustee doesn't only look at your finances from that one moment in time. In bankruptcy, you can protect certain assets up to a certain value; but if your home's value is near the threshold, a trustee may delay completion of your bankruptcy to give it the chance to cross over that threshold, and thus become an unprotected asset. Then it could be liquidated.

However, a trustee can't use this delay tactic indefinitely. Your bankruptcy must be completed in a reasonable amount of time. In addition, with a lawyer on your side, you can combat certain unfair or nefarious attempts by a trustee to delay your proceeding.

In the end, the answer to the question (can a Chapter 7 save my home?) is a "soft yes." There are no guarantees, but in many cases, a Chapter 7 can save your home.

Source: Fox Business, "How Safe is My Home in Chapter 7 Bankruptcy?," Justin Harelik, Aug. 21, 2013

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