Can I Keep My House If I File for Chapter 7 Bankruptcy?

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Can I Keep My House If I File for Chapter 7 Bankruptcy? This is a common question from most of my clients. Usually the house is an issue that is also a main factor when determining if one should file for chapter 7 or chapter 13. If the equity in your property is more than the homestead exemption, then you cannot file a chapter 7. Instead, debtors file Chapter 13 since they are not eligible for a chpater 7.  

When Debtors Can Keep a House Under Chapter 7

Debtor(s) can keep the house in a Chapter 7 if the equity in the house is not more than the homestead exemption available for the state in which debtor is filing. California has 2 'systems' of bankruptcy exemptions.You must choose one. Each has different exemption provisions. Most debtors fall under the system of exemption that is available for those who are earning regular monthly income. If debtor earns monthly income, then, the house or real property must have an equity of no more than $20,725. 

Calculating Home Equity

Equity can be calculated as the Current Market Value of the Real Property minus the amount still owed on the property. For example, if your house is currently valued at $300,000 but you stilll owe $250,000, you have $50,000 of equity on your real property.  Since it is over the regular homestead exemption, the real property is not eligible to keep in a chapter 7.

Exceptions

Special exceptions apply to the following: Real or personal Property you occupy including a mobile home, boat, stock cooperative, community apartment, planned development or condo exemption is $75,000.00 if single and not disabled; $100,000.00 for families if no other member has a homestead; $150,000 if age 65 or older, or physically or mentally disabled; $100,000 if 55 or older, single and earn under $15,000 or married and earn under $20,000 and creditors seek to force the sale of your home; sale proceeds exempt for 6 months after received (husband and wife may not double the amount and may file a homestead declaration.

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