When people think of bankruptcy, they think of them losing all their properties, including the roof over their head. As a result, those who would benefit from filing for bankruptcy are hesitant to file. But in reality, filing for bankruptcy is not about entering poverty, but more about clearing your debts and giving you a clean slate.
In fact, thanks to the bankruptcy laws in Los Angeles, it is possible to keep your property and assets while filing for bankruptcy. So, if you’re wondering what can happen to your home, here’s what you need to know.
Chapter 7 and 13 Bankruptcy: What’s the Difference?
When filing for bankruptcy, you have two options: a Chapter 7 and a Chapter 13.
Under a Chapter 7 bankruptcy, you liquidate your properties to pay off your debt. These properties will be taken by the government, sold, and the profits used to pay your creditors accordingly. This is the option for those whose income may not be enough to pay off your debts within 3 to 5 years.
In comparison, a Chapter 13 bankruptcy allows you to keep your properties, but you will have to spend the next 3 to 5 years paying off your debt in a modified repayment plan where you only pay part of your debt. This is the option for people who have stable income that can feasibly allow them to keep their properties and pay off their debt.
There are a lot of factors and requirements needed to file for either. There are also bankruptcy laws in Los Angeles that can protect certain properties from being taken. If you find yourself in debt, it’s best to find a bankruptcy lawyer that can help guide you through your particular situation, as not all cases of bankruptcies are alike.
Liquidating Your Property
If you decide to file for a Chapter 7 bankruptcy, it is possible that your home will be liquidated and used to pay off your debts. Which creditor gets how much from the sale will depend on a lot of factors, but the biggest advantage is that once your house, along with your other properties, are sold off, your debts are considered cleared.
While this might seem like an option for those who might not be able to pay off their debts within the next 3 to 5 years, there are some drawbacks. For instance, a Chapter 7 bankruptcy will affect your credit scores for 10 years from the filing date (compared to 7 years for Chapter 13 bankruptcy). This means if you apply for a loan or a credit card, banks and lending companies may not approve your application until your bankruptcy record is discharged.
Can I Keep My Home?
The short answer: it depends on your circumstances, so it’s best to consult with your lawyer. But under certain circumstances, it is possible to keep your home whether you file for a Chapter 7 or Chapter 13 bankruptcy.
As long as there is another way for you to resolve your debts, you can legally continue to stay in your property. However, given that your property can come with added costs to own and maintain, you might be considering selling your property as the more practical solution, especially if you have multiple unoccupied properties.
Sell Your Home
If you decide to sell your home, you have two options: advertising your house on a listing, and going to a professional home buyer.
Should you decide to go the traditional way, you have to undergo several processes and requirements. First, you’ll have to hire a real estate agent to put your listing on the right channels. This will cost you around 6 or 7 percent of how much your property sells for. Next, you will have to pay for renovations and repairs to increase your home’s property value while also making it attractive to potential buyers. After you find a buyer to close the deal (which can take between weeks to months, depending on the demand and location of your home), you will have to deal with the closing costs and the additional fees of selling a home.
In contrast, going to a professional home buyer is the faster and hassle-free option of selling a home. You do not have to hire a real estate agent, so you don’t have to pay for a middle-man during the transaction. You also do not have to renovate the house to make it more attractive to a professional home buyer since they buy properties as-is. Professional home buyers pay with cash, which means a faster transaction since you do not have to wait for a loan to be approved. And finally, professional home buyers handle the closing costs of a sale, so what you earn from the sale isn’t deducted.
Despite filing for bankruptcy, you could still manage to keep your property. However, if you find it more practical and in your best interests to sell your property, you have the option to go the fast and hassle-free route with minimal costs on your part.
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