When your debt spirals out of control, many parts of your life may wind up affected by your current state of financial hardship. People often struggle to balance their budget or meet all of their standard living costs, ranging from the need to buy groceries to the payment of their mortgage and other critical bills. Once you have fallen behind in your mortgage, you are at risk for your lender to begin foreclosure proceedings.
Foreclosure defense involves people going to court to try to prevent their lenders from taking their real estate away from them. For some people, proof of payments or a minor adjustment to the terms of the loan itself may be the only steps necessary to prevent foreclosure. For others whose situations may have become more out of control, bankruptcy might be the better solution for a potential foreclosure.
Will you automatically lose your home when you file bankruptcy?
There are multiple forms of bankruptcy, and each of them has different requirements. Depending on the formal personal bankruptcies, it is possible that the courts may require that you liquidate or sell some of your assets to repay creditors.
If you pass the means test and qualify for Chapter 7 bankruptcy, the courts could order you to repay your creditors by liquidating some of your possessions. That may include some of your home equity. However, New York allows you to exempt a substantial amount of acquired equity in Chapter 7 proceedings.
How much equity can you protect?
Property values and exemptions vary drastically based on location in the state. Although the legal code states specific amounts by county, those amounts have gone up in recent years to reflect housing costs and inflation. Those living in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester or Putnam counties can exempt up to $170,825 of home equity.
Those in Dutchess, Albany, Columbia, Orange, Saratoga or Ulster counties can exempt up to $142,350 in equity, and those living in any other county can exempt up to $85,400. Those amounts double for a jointly-owned property when both spouses file for bankruptcy.
Obviously, if your equity exceeds those limits, the potential exists for the courts to order you to refinance your property and use some of that accumulated equity to repay creditors before you can receive the discharge.
Discussing your financial circumstances and looking over your current equity in the home will give you a better idea of how to proceed to maximize the protections available to you and your home during bankruptcy.