In the U.S., there is often a negative shadow cast across the idea of going bankrupt. While the fear of struggling with extreme financial difficulties and being unable to pay back various debts is quite justified, bankruptcy is still stigmatized as the worst possible outcome. In reality, much of the anxiety about how bankruptcy will affect one’s life is either over-exaggeration or myth. Behm Law Group, Ltd. will help you by revealing the distinctions between reality and fallacy during the process of filing for bankruptcy in Mankato, MN.
One common misconception around the bankruptcy process is that the individual filer will lose everything, including their home. In fact, even under Chapter 7 liquidation bankruptcy, there are conditions that allow the filer to keep their home.
Home Equity
Your home or property can only be liquidated during the Chapter 7 bankruptcy process if it has equity. Home equity essentially means that the value of your property is higher than the value of your mortgage on that property. If you have a home valued at $300,000, and your mortgage is $200,000, you have $100,000 in equity, and a bankruptcy trustee could, theoretically, sell the home to pay off the mortgage debt you owe.
If you have no equity (your mortgage value is greater than your property value), your trustee will abandon the property and it will not be liquidated to pay debts.
Homestead Exemption
Even if you have home equity, there is still a way to keep your home with the Minnesota homestead exemption. If your homestead exemption can cover the value of your home equity (Minnesota allows exemptions up to $390,000 for homes in cities), you may protect the equity in your home and keep your home in the liquidation bankruptcy process.
Continued Payments
Although your mortgage creditor cannot target you as an individual during the bankruptcy process, payments must still be made to repay the debt on your mortgage. If you are able to continue payments on your mortgage during and after a Chapter 7 filing, your mortgage creditor will not take your home from you and the equity in your home will be preserved and protected for your benefit.
If you are balking at filing for bankruptcy because you fear you may lose your home, know that you will be able to protect the equity in your home with the Minnesota homestead exemption. For more information about filing for bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200.
