Ohio residents who are experiencing financial hardships and fear losing their homes may be considering their options. One of those is filing for bankruptcy, and the intention of the federal Bankruptcy Code is to help people to rebuild their lives. But will that save their homes? The answer depends on several aspects related to the unique circumstances of the individual and also the laws of the state.
If a Chapter 7 bankruptcy is filed, a person’s home may be safe if the equity in the property is lower than the state government’s exemption amount for houses. However, if the equity exceeds the exemption amount, the home may be sold at auction to cover some of the unpaid debts. Ownership of cars may be saved by signing an agreement reaffirming the debt after bankruptcy. If this is not done, the car may be sold with the proceeds applied to existing debt.
By filing for Chapter 13 bankruptcy, the filer may continue paying a mortgage, car payment and other debt over a period of three to five years at reduced monthly installments. The court must approve the payment plan, and it will be monitored by a court-appointed trustee to whom payments must be made for distribution to creditors. While the specified payments are kept current, ownership of the house will be secure. In both bankruptcy chapters, unsecured debts such as credit card debt and medical debt may be discharged. In Chapter 7, the full amounts may be discharged; in Chapter 13 proceedings, the balance at the end of the repayment period is subject to discharge.
If an individual has filed for Chapter 7 bankruptcy and then realizes that his or her property may be seized, it may be possible to convert the filing to a Chapter 13 bankruptcy that may save the house. However, it may be a complicated process and a consultation with an experienced Ohio bankruptcy attorney may provide the necessary guidance. When pursuing a solution to save ownership of a house, following the appropriate legal procedures is vital.
Source: The Washington Post, “What happens to your house when you file for bankruptcy“, Jonnelle Marte, July 26, 2016