Can You Keep Your Home After Filing for Bankruptcy in New York?

Filing for bankruptcy can be a daunting experience, and one of the most common concerns is whether you can keep your home. In New York, the answer largely depends on the type of bankruptcy you file and your personal financial situation.

There are two primary types of bankruptcy individuals typically file: Chapter 7 and Chapter 13. Understanding how each impacts homeownership is crucial for homeowners facing financial distress.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy involves liquidating non-exempt assets to pay off creditors. In New York, there are exemptions available that can protect your home. Under New York State law, the homestead exemption allows you to protect a certain amount of equity in your home. As of the current guidelines, this exemption can safeguard up to $170,825 of equity for individuals, and up to $339,250 for married couples filing jointly, depending on the county.

If your equity exceeds these limits, you might be required to sell your home to pay back creditors. However, if your equity is within the exemption limit, you can typically keep your home through the bankruptcy process.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, allows you to keep your assets while restructuring your debts. This option is often more beneficial for homeowners who are behind on mortgage payments but want to catch up. Under Chapter 13, you create a repayment plan lasting three to five years, during which you can make up missed payments. This makes it an advantageous choice for arrears on your mortgage, enabling you to avoid foreclosure.

Additionally, New York has a “foreclosure prevention” program that may allow homeowners to retain their property while proceeding through bankruptcy. Chapter 13 gives homeowners the breathing room they need to regain financial stability without sacrificing their home.

Considerations and Alternatives

It’s essential to consider your overall financial situation when deciding whether to file for bankruptcy. Consulting with a bankruptcy attorney can provide personalized guidance based on your circumstances. They can help you evaluate alternatives, such as debt negotiation or credit counseling, which may allow you to keep your home without the need for bankruptcy.

Furthermore, if your main concern is avoiding foreclosure, other options, such as loan modification or a short sale, may be more appropriate, depending on your unique situation. Always assess all your options before deciding on bankruptcy, as each choice has implications for your financial future.

Conclusion

In New York, whether you can keep your home after filing for bankruptcy is influenced by the type of bankruptcy you choose and the equity you have in your property. Chapter 7 might offer protection for homes with limited equity, while Chapter 13 can provide a pathway for homeowners to retain their property through debt restructuring. Always seek professional advice to navigate these complex decisions effectively.