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Legal Tip of the Week: You Can File for Bankruptcy & Still Keep Your Home



by Marine View Law & Escrow

Did You Know…That You Can File For Bankruptcy And Still Keep Your Home?

So many times, when we meet with clients regarding bankruptcy, they come in with many preconceived notions about bankruptcy. One of the most common I hear is that people think that they will lose their home just because they’ve filed for bankruptcy. But that’s not true. You can file for bankruptcy and still keep your home.

If you are current on your home mortgage(s), you can keep your home and discharge debts. This is true for both types of consumer bankruptcy filings, Chapter 7 and Chapter 13. In a Chapter 7 situation, you’ll file for bankruptcy, and about 3 months later you’ll have a discharge relieving you of most, if not all, of your unsecured debts, and possibly even some secured debts, and you’ll still have you home afterwards and you’ll continue paying your mortgage(s) as usual.

But what if you have equity in your home? You can still file for bankruptcy and protect up to $125,000 in equity in your home, after deducting the costs of sale (which run about 8% here in King County). Take the following example: Your home is worth $400,000. You owe $250,000 on the home, leaving about $150,000 in equity. However, it would cost about 8% to sell your home (3% to each real estate agent and 1.78% to King County for Excise Tax). 8% of a sales price of $400,000 is $32,000. You further subtract the $32,000 from your equity of $150,000, leaving a net equity of $118,000. You can file for bankruptcy, either chapter, and not lose one cent of the equity in your home.

Now, for many people, not only do they not have equity in their home, but they are also behind on their mortgage payments. Maybe they had a mortgage with an adjustable interest rate which caused their payment to increase, maybe there was a loss of income, medical concerns, or another type of hardship that caused them to get behind on their mortgage. We can help you get current on your mortgage. A Chapter 13 bankruptcy can cure the default on your first mortgage and we may even be able to remove your second mortgage from your home entirely.

As you can see, bankruptcy can be a very effective tool for people who may need it. Bankruptcy gives people a fresh start and allows them to get off of a vicious financial cycle of relying upon credit cards and other types of debts to get them through month to month, sometimes at interest rates of over 20%. Call our office today and schedule a free bankruptcy consultation to see if it may be a right fit for you to relieve you of your financial stresses.

Please note that the information provided in general in nature and may not apply to all individuals. We are a debt relief agency. We help people file for bankruptcy under the bankruptcy code.

To learn more about Marine View Law & Escrow, visit their website: www.marineviewlaw.com

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