If you are in danger of losing your home to creditors, it may be time to consider a chapter 13 bankruptcy. This will give you a chance to pay off your creditors in an orderly manner as funds become available. During the chapter 13 process certain assets are protected from creditors, and the most important of these is your home.
When you file for chapter 13 bankruptcy, you will be required to create a plan showing how you are going to pay off your current and past-due debts over a period of three to five years. A chapter 13 bankruptcy does not make the debt go away, but instead gives you time to manage the payments. If you have fallen behind on loan payments, a chapter 13 bankruptcy may allow you to keep your home while making up those payments over time.
You may elect to file a chapter 13 bankruptcy at any time. The cost includes two fees, and totals $185 as of 2008.
Exemptions Protect Your Real Estate Property
When you file a bankruptcy, certain property is protected from creditors. These protections are known as exemptions. The major exemption is called the homestead exemption, and it protects your home.
You may claim a homestead exemption in Tempe, Arizona to protect up to $100,000 in equity on your house, apartment, or mobile home that you occupy. If you rent, an exemption exists to cover any prepaid rent or security deposits up to $1,000 or 1.5 times your monthly rent, whichever is less. You may only claim one of these exemptions.
This exemption covers the equity in your home, not its sale value. If you’ve taken out a $150,000 mortgage and paid back $25,000 of it, your home would be protected. Any excess equity above the exemption limit becomes part of the bankruptcy plan and must be paid to help settle your outstanding debts. If you’re behind on your loan, you must also make up those payments, but that can be done as part of the three to five-year plan. You must also make any usual monthly loan payments.
Chapter 13 Bankruptcy and Your Monthly Utilities
Filing for bankruptcy should not affect your electrical and gas service, as the utility companies are not allowed to cancel your utilities because you filed. The companies may request a deposit for further service, however, and you will be required to pay any utility bills that are issued after you’ve filed for bankruptcy.
Take note that this page is for informational use only and should not be considered legal advice. If you believe a bankruptcy might be in your future, consult an expert to receive current and correct information. Bankruptcy laws may vary from state to state.