Bankruptcy When You Own A Home in New York
While filing for bankruptcy can be stressful, it doesn’t necessarily have to result in the loss of your home. In fact, both Chapter 7 and Chapter 13 bankruptcy provide filers with ways to keep their homes despite their financial difficulties. Below are some issues to consider when determining whether to file for bankruptcy as a homeowner in New York.
Homes with Nonexempt Equity
An important consideration when determining whether to file for Chapter 7 or Chapter 13 bankruptcy is home equity. In New York, homeowners receive a homestead exemption that protects the equity in their homes. However, the amount covered varies depending on the county in which the home is located, so the homestead exemption does not always cover all of the equity in a filer’s home. When a property owner with nonexempt equity in his or her home files for Chapter 7 bankruptcy, the trustee sells the property and distributes the nonexempt portion of the sale proceeds among the homeowner’s creditors.
Chapter 13 bankruptcy, however, allows even those homeowners with nonexempt equity to keep their homes. Under Chapter 13 bankruptcy, debtors with nonexempt home equity are permitted to pay back this amount according to the terms of a court-approved repayment plan.
Homes with Mortgages
Chapter 7 bankruptcy filers do not have the option of repaying their creditors through a repayment plan. Therefore, Chapter 7 filers who own homes with mortgages must pay back all past due amounts immediately in order to keep their homes. In addition, Chapter 7 bankruptcy is typically a fairly quick process, so it doesn’t afford debtors as much protection in this area as Chapter 13 bankruptcy. If a Chapter 7 bankruptcy filer fails to bring his or her mortgage account current, then the lender can foreclose on the subject property.
Chapter 13 bankruptcy, on the other hand, prevents foreclosure and allows debtors to make up missed payments through a repayment plan. Chapter 13 repayment plans, which normally last between three and five years, allow filers plenty of time to cure their defaults. In addition, Chapter 13’s automatic stay prevents foreclosure for as long as the filer continues to make plan payments and mortgage payments on time.
New York Legal Representation
Bankruptcy can have both positive and negative consequences, and there are a number of factors that must be considered when deciding whether it is the right decision for you. Given the possible implications of filing for Chapter 7 or Chapter 13 bankruptcy, we highly recommend that you contact an experienced New York bankruptcy attorney prior to making a final bankruptcy decision. An experienced New York Chapter 7 or Chapter 13 bankruptcy attorney will keep you apprised of your rights while ensuring that you understand all of your debt relief options. Please contact the experienced attorneys at O’Connell and Aronowitz for a free consultation.