Most people filing bankruptcy do not own a home. About 15% of Geraci law bankruptcy cases, both chapter 7 and chapter 13, involve people on title to their principal residence. There is a difference between being a title holder on your principal residence and being on the title of some other real estate. Here are some questions we will ask you to tell you if we can protect your home, that is your residence, in either Chapter 7 or Chapter 13:
Who is on title? Most people received a title interest in the home they live in when they purchased it because the seller issued a deed to them. Get out your closing papers, and look at the deed, or the title policy. It will say who the grantor, or seller was, and who the grantee who received the title interest was. Is one of those people you? Is anyone else the titleholder? If it was not a purchase, but someone quit-claimed interest to you, you must get that deed to find out exactly what interest they quit-claimed to you?
The question of who is on title is explained by the chain of title, by various deeds.
Is the deed by which you took title recorded? Each county in most states has a recorder of deeds, and grantor-grantee index. Properties also have a property index number or PIN. You can easily look up your property and see the chain of title, going back to the original subdivision if you like. One person or company deeded it to another to another and then to you. If you don’t see a deed to yourself, that can be a problem. The seller, or you, may have never recorded the deed. Never file a Chapter 7 bankruptcy without making sure that deed was recorded when you thought you purchased or took title to the property. An unrecorded deed means that, in a chapter 7, the bankruptcy trustee can take your house free and clear of any mortgage free and clear of your interest.
What’s your interest in the property? Assuming that you are on the title, in the deed by which he took title as recorded, are you joint, tenant-in-common, or do you hold it with a spouse’s tenancy by entirety, or in a land trust.
What is the value of your interest? Let’s say that you and your spouse own your residence as joint tenants and it’s worth $400,000, and your mortgage is $300,000, with no second mortgage or HELOC. You would have $100,000 gross equity. Since you have an undivided one half interest, you have $50,000 gross equity.
How much of your gross equity can you protect in bankruptcy, either in Chapter 7 or 13? In chapter 7, a certain amount, often $15,000 and sometimes more, is exempt from creditors, so you may have too much equity to file Chapter 7 and protect your home. People who have regular incomes can pay out sufficient amount to unsecured creditors to protect the house by filing chapter 13. Example above, it is a close call, so we might recommend a chapter 13 that pays $10,000 to the unsecured creditors protect the equity in this house. This is assuming that one spouse is filing the other is not.
Definitely, if a foreclosure is threatened if your behind in your mortgage, condominium, or homeowners association payments, chapter 13 can allow you to force them to take your current payments going forward, and give you 36 months or more to make up the back payments. Chapter 7 is of no help in a foreclosure.
If you are current in your mortgage payments, and your equity is protected by the exemptions, we can file a chapter 7 and reaffirm your mortgage, and in that case your house is not affected by a chapter 7 filing. Geraci Law is proud that we have not lost a house in any bankruptcy in 40 years you provide us with the proper information to start out with, since we can advise you properly and protect your house in either Chapter 7 or Chapter 13, or advise you not to file bankruptcy at all.