Will I lose my house if I file bankruptcy?
If you are current on your mortgage you may keep making your mortgage payments to the secured creditor. This is true in chapter 7 and chapter 13. If you are behind on your mortgage you typically must file a chapter 13 bankruptcy which will allow you to catch up the past due amounts over a period of up to 5 years. For the most part you must be able to afford the regular monthly payments; however, in some cases you may be able to lower your monthly payments by completely avoiding junior mortgages and equity lines if the value of the home is less than liens that are superior to the mortgage sought to be avoided.
The second issue relates to the amount of equity that exists in the property. The law sets limits on the amount of equity you may retain in property. Determining the proper exemptions to use has become somewhat more complicated after passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Generally, however, if you have lived in North Carolina for a period of 2 years, North Carolina’s exemptions apply and an individual may exempt $35,000 equity in a residence or $70,000, if both a husband and wife file bankruptcy. If the property is not a residence the exemption is limited to $5,000 per debtor.
There is, however, an exemption for North Carolina real estate that is potentially unlimited, known as “tenancy by the entireties. ” Entireties property is real estate jointly owned by a husband and wife which is located in North Carolina. If there are no joint debts, entireties property is exempt from the claims of either spouse’s individual creditors, except for taxes. This exemption applies in bankruptcy and can protect real property with any amount of equity. If property exists that is not fully exempt, a chapter 13 may be suggested which would allow the payment of this excess equity over a period of up to 5 years.
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