If you are struggling to pay your bills, filing for bankruptcy may be an ideal way to eliminate or reorganize existing debt balances. Depending on the circumstances of your case, it may be possible to do so without losing your Tennessee home. There are a number of factors that may determine whether you get to keep your house.
The type of proceeding is important
In a Chapter 7 case, nonexempt assets are liquidated in an effort to repay creditors. In a Chapter 13 case, you generally get to keep property such as a house or car assuming that you continue to make loan payments on time.
Equity in the home may be protected
In a Chapter 7 proceeding, a trustee may not move to liquidate your home if you owe more than it is worth. The same may be true if the amount of positive equity in the house is less than the homestead exemption. The homestead exemption allows you to retain a portion of the property’s equity even if it is liquidated. During a Chapter 13 proceeding, you may have the right to sell a house that has equity in it as opposed to allowing it to go into foreclosure if you fail to stay current on the loan.
Your children’s needs may be taken into account
A trustee may decide that you can keep your house during a Chapter 7 bankruptcy case to ensure that your kids have a safe place to live. As a custodial parent, you may be allowed to remain in the home until your case has been discharged.
Filing for bankruptcy may come with a number of benefits beyond being able to keep your home. In addition, it may actually help you improve your credit score or creditworthiness as it may reduce your debt-to-income ratio as well your credit utilization rate. After your petition has been received, you will receive a stay of creditor activity.