Can Chapter 7 bankruptcy save my home from foreclosure?

Can Chapter 7 bankruptcy save my home from foreclosure?

A Chapter 7 is a liquidation bankruptcy where the trustee is tasked with selling any non-exempt property to pay creditors. However, those declaring bankruptcy may not have many assets worth selling. The instant a debtor declares bankruptcy any and all foreclosure proceedings must stop. While this may give you several months to deal with your situation, it is not a permanent fix.

In some cases, it may be that the debtor owns their home or has other valuable assets that could be sold. This is when you and your attorney discuss bankruptcy exemptions. Many Chapter 7 debtors can keep a significant amount or all of their property. However, it takes working with a skilled bankruptcy attorney to make that happen.

For Chapter 7 filings in Pennsylvania, debtors may use the federal or state exemptions, but they cannot mix and match. A quick look at Pennsylvania exemptions shows that a debtor may exempt some of the following:

  • Insurance/annuity payments for up to $100/month
  • Personal property such as clothing and some books
  • 75 percent of the debtor’s wages
  • Public pensions/private retirement benefits
  • A wild card exemption

If you are facing foreclosure, you likely have debt issues and if Chapter 7 would eliminate that debt and allow you more time in your home, Chapter 7 bankruptcy may be a valid option. Some lenders opt to wait until you are through the process and reschedule a foreclosure sale once it is done. This leaves you with about a four month delay and enough time to discuss strategy with your Melaragno, Placidi & Parini bankruptcy attorney.

Pennsylvania does not have a homestead exemption, but a home can be protected in other ways under state law or by using federal exemptions.

If you choose the federal bankruptcy route, there is a homestead exemption available. There is also a car or truck exemption available (up to certain amount), household goods, retirement and pension benefits, and a wildcard exemption.

Filing for bankruptcy is a complex process and without legal assistance, it could end in disaster for the debtor. Discuss your situation with an attorney.

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