There is no question that someone even considering filing for bankruptcy is in a fairly stressful place. One of the fears these individuals grapple with is the question of whether or not they will have to give up their house in the bankruptcy. This might be the most common question attorneys who practice bankruptcy law field on a regular basis. The answer is mostly good news; in most cases, debtors who file for bankruptcy will be able to keep their homes through something called the “homestead exemption.”
What is the Homestead Exemption?
The general spirit of the homestead exemption is that the better angels in our society do not want to see debtors, who are simply looking for a fresh start, to be put out of a home. To keep those who file for bankruptcy from losing everything, states (and the federal government) allow certain items to be exempt from creditors in a bankruptcy case. The primary residence (homestead) of debtors is one of these exemptions.
Are There Limits to the Homestead Exemption?
Yes, there are limits. While other states (like Florida and Texas) have very generous homestead exemption amounts, Ohio has a (still generous) limit of $145,425. This means that up to $145,425 of equity in a home is off limits to unsecured creditors in a personal bankruptcy. This is a fairly generous amount, especially compared to the amounts from recent years.
To illustrate the homestead exemption, let’s consider a few simple scenarios. Let’s say a mortgage borrower has $45,000 of equity in a home that was bought for $105,000. The equity amount in this case ($45,000) is well below the Ohio homestead exemption, so if this debtor decides to file for bankruptcy, he or she should not have to worry about losing the home to unsecured creditors.
Can Houses Still be Foreclosed on if You Miss Mortgage Payments?
Unfortunately, yes. When you file for bankruptcy, you receive what’s called an automatic stay. This stops debt collection efforts such as foreclosure and calls from debt collection agencies. However, this reprieve is only temporary, often lasting a handful of months. After your bankruptcy case proceeds and the automatic stay is lifted, you are usually still responsible for making mortgage payments (even if you file for Chapter 7 bankruptcy). If you are still unable to pay your mortgage for a certain amount of time, you are in danger of getting foreclosed on.
We understand that filing for (or even considering) bankruptcy can be a scary time. You’re worried about so many things, including the status of your home and whether or not you will have to move out. Fortunately, there is an exemption when it comes to your residence, but there are a few requirements you must satisfy in order to keep your home in your possession.
Charles Tyler, Sr., Esq. is well-equipped to provide you with a compassionate, but competent, legal presence during difficult times in your life. Together, we will help you get to a better place. You can reach us by phone at 330-664-9919 or schedule an appointment with the firm directly here.