Bankruptcy Attorney Discusses How to Keep Your Home
Serving Homeowners in Pierce County and Tacoma, Washington
Many people considering Chapter 7 bankruptcy worry about losing their biggest asset—their home—in the process of getting rid of their debts. Discuss your situation with a bankruptcy lawyer to discover your options. In many instances, you can keep your home.
Homeowners who desperately need the debt protections afforded by Chapter 7, more often than not, delay their bankruptcy filing – waiting for another solution that never appears as their situation continues to deteriorate. They make the common mistakes of refinancing their homes, tapping into their retirement funds, or selling their homes at a greatly reduced price.
These are not only unnecessary measures, but often foolish and end up wasting a person or couple’s nest egg.
The fact of the matter is, in most bankruptcy cases, the bankruptcy trustee will not liquidate your home to pay off creditor claims. In fact, under current bankruptcy law, most clients find that even if they have significant equity in their home, it is fully protected from liquidation by federal and Washington exemption laws.
Your home equity, under federal exemptions is exempt up to $21,625, as long as your home is used as your primary residence. If you represent half of a married couple, this amount is doubled, as both of you are allowed to claim this exemption in residential real estate. If you have more equity than that, you can utilize your Washington state homestead exemption up to $125,000.00 in equity.
Not sure of your net equity for the purposes of bankruptcy?
To determine equity take the value of your home, subtract any mortgages or other liens you have attached to it, and then deduct hypothetical costs of sale of 10%. The result is your equity.
For example, if your house is worth $400,000 and you have a first mortgage on which you owe $250,000, and the costs of selling your home (realtor fees, excise taxes, tile report, escrow fees, etc.) would be approximately 10% of the value, or $40,000, you have $110,000 in net equity. If you selected the Washington state homestead exemption protecting up to $125,000 in equity, your home would appear to be safe—even in Chapter 7 bankruptcy.
You can get a fresh start through bankruptcy and keep your home. You will still have to make the mortgage payments but you will be relieved of credit card, medical, and other unsecured debts.
Bankruptcy is not shameful, it is your right, and it is your opportunity for a fresh start in these tough economic times. Let an experienced bankruptcy attorney in Tacoma help you. Call us today!