Do You Automatically Lose Your House by Filing Bankruptcy
Do you automatically lose your house by filing a Chapter 7 bankruptcy? Individuals who either arrive at the question due to poor decisions or as victims of circumstance have legitimate cause for concern. As one of the most common chapter of bankruptcy in the United States, many individuals must ask themselves whether their most valuable asset is subject to seizure or other penalties when they are considering bankruptcy. Most other major assets are settled, renegotiated, or seized when bankruptcy occurs, so the question of whether real estate assets are seized during such a trial.
Particularly because Chapter 7 involves the liquidation of capital assets and financed obligations, the question of property loss is strongest with said proceedings. Houses, townhomes, condominiums, rental properties, and many other assets may be seized during a Chapter 7 bankruptcy, so it is only natural to worry that one’s primary residence may be seized during the proceedings. This does not, of course, answer the question, do you automatically lose your house by filing a Chapter 7 bankruptcy?
While Chapter 11 and 13 bankruptcy almost exclusively involve restructering of financial obligations, Chapter 7 predominantly involves the seizure and sale of debt-financed assets. Fortunately for persons undergoing Chapter 7 bankruptcy, the primary residence of the person declaring bankruptcy is exempt from direct seizure. While most debt obligations will be eradicated in the process of undergoing Chapter 7 bankruptcy, the primary residence of the bankrupt cannot be seized, though the debt obligation may be restructured in the circumstance of bankruptcy. Many assets will be seized and sold to pay off or settle existing debts, but your primary residence is preserved so as not to drive anyone into a situation of homelessness.
Chapter 7 is a last resort activity, but basic preventative measures are in place to assist the recovery of the individual declaring bankruptcy. Debts that can be repaid or settled are handled immediately, and casting a person from their home would guarantee that any remaining financial obligations would remain unfulfilled. In order to ensure that remaining debts can be paid and that the life of the bankrupt is not utterly ruined, a primary residence will not be seized and liquidated, so as to enable the newly bankrupt to restore themselves to eventual solvency.
Many people are driven by unfortunate circumstances to ask the question, "Do you automatically lose your house by filing a Chapter 7 bankruptcy?" If you are facing this situation, you can take solace in the knowledge that you will be able to keep your home. Your situation will not be ideal, but bankruptcy can help remove the most burdensome debt, and restructure the remaining obligations to a manageable degree.If you need more information about your home and what you are entitled to keep, know your options. Sometimes a good option is a reverse mortgage.
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