The main concern of many bankruptcy petitioners is their home. They know that bankruptcy is their best (or only) means of solving their financial situation, but they don’t want to lose their house. Many are willing to go to extreme measures not to lose their home.
Consider this real life example:
Jane McCadden is considering filing Chapter 7 bankruptcy. She currently has no income due to a surgery that has left her unable to work during her prolonged recovery time. She can’t pay her bills because she has no income. Eventually, she will receive some Social Security income, but not right away and when she does it will not be enough to cover all her bills anyway. She knows she needs to file bankruptcy, but she doesn’t want to lose her house. She can’t afford the mortgage payments, but she is still looking for any chance that there might be to hang on to her home.
This is the most difficult situation, yet it is one that many potential bankruptcy petitioners find themselves facing. The answer is less likable than I’d like, but it’s still the answer. In most cases, filing for bankruptcy will not cause you to lose your home in this type of situation. But failing to pay your mortgage payment will result in the loss of the property. In the case of Jane McCadden, filing bankruptcy could offer bankruptcy protection for the home’s equity (with specific bankruptcy rules regarding equity in the home varying by state).
Florida: Bankruptcy petitioners are allowed to protect 100% of their home’s equity as long as it is owner-occupied.
California: Bankruptcy petitioners are allowed to protect anywhere from $75,000 to $175,000 in an owner-occupied home.
Due to the variations between states, verify the specific amount you are legally allowed to protect according to state law before you decide to file. To do so, contact an experienced bankruptcy attorney that handles bankruptcy cases in your area to discuss your case in detail.
If you have additional questions about how to protect your southern California home during bankruptcy, please get in touch with one of the bankruptcy attorneys at Westgate Law.