Can You Keep Your Home When Filing for Bankruptcy in Massachusetts?

Filing for bankruptcy can be a daunting experience, particularly when it comes to concerns about losing your home. If you’re in Massachusetts and contemplating bankruptcy, understanding your options regarding home ownership is crucial. This article will dive into how bankruptcy can affect your home and what protections are available.

In Massachusetts, the type of bankruptcy you choose to file can significantly influence whether you can keep your home. Most individuals opt for Chapter 7 or Chapter 13 bankruptcy, each having its own rules and implications for property ownership.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy.” This process allows individuals to eliminate unsecured debts, such as credit cards and medical bills. However, it could pose a risk to secured assets, including your home, if you owe more than the value of your exemptions.

Massachusetts allows homeowners to exempt up to $500,000 of equity in their primary residence under the homestead exemption. If your home equity falls within this limit, you can likely keep your home while discharging your debts. For those with minimal equity, bankruptcy could be a viable option not only to eliminate debts but also to retain home ownership.

Importantly, if your mortgage payments are up to date and you reaffirm the loan, you can keep your home. Reaffirming means that you will remain liable for the mortgage after the bankruptcy case is closed, thus allowing you to maintain ownership.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is described as a “reorganization bankruptcy.” This option is suitable for individuals with a regular income who want to keep their assets, including their homes. Under Chapter 13, you create a repayment plan to pay back debts over a period that typically lasts three to five years.

One of the main advantages of Chapter 13 is its built-in protection against foreclosure. If you are behind on your mortgage payments, filing for Chapter 13 allows you to catch up on those payments over time while keeping your home. You must meet the criteria for income and debt limits, but if you do, Chapter 13 can be an effective strategy to protect your home from foreclosure and eliminate unsecured debts simultaneously.

Consulting a Bankruptcy Attorney

It’s highly advisable to consult with a qualified bankruptcy attorney in Massachusetts before making any decisions. An attorney can provide personalized advice based on your financial situation and help you navigate the complexities of bankruptcy laws. They can also assist in filing forms accurately and represent your interests in court.

Conclusion

Filing for bankruptcy in Massachusetts doesn’t automatically mean losing your home. Understanding the nuances of Chapter 7 and Chapter 13 bankruptcy can empower you to make informed decisions about your financial future. By leveraging the homestead exemption and understanding your rights, it is possible to retain ownership of your home while pursuing relief from overwhelming debt.

Make sure to stay proactive regarding your finances and seek professional help to ensure you’re making the best moves for yourself and your family during challenging times.