Will I Lose My Home if I File for Chapter 7 Bankruptcy?

If you’re considering filing for Chapter 7 bankruptcy, you probably have a lot of questions—including whether bankruptcy will put your home at risk. If you file for Chapter 7 bankruptcy, you won’t necessarily lose your home—particularly if you don’t have much home equity and your mortgage is current. However, if you have a significant amount of equity in your home, you may be better off filing for Chapter 13 bankruptcy. In this article, we examine the effect that filing for Chapter 7 bankruptcy can have on your home. 

Important Factors

Whether you’ll lose your home in Chapter 7 bankruptcy depends on 

  • whether your mortgage is current,
  • whether you’ll be able to continue making mortgage payments after filing for bankruptcy,
  • the amount of equity you can protect using a homestead exemption, and
  • the amount of equity you have in your home.

Is Your Mortgage Current?

You may lose your home in Chapter 7 bankruptcy if you’re behind on your mortgage payments when you file. Although the court issues an automatic stay when you file, this usually only serves to delay the foreclosure process for a few months. The reason that filing for Chapter 7 bankruptcy won’t cure a default is that a mortgage is a secured debt. Therefore, Chapter 7 bankruptcy won’t wipe out the mortgage lien that permits the lender to foreclose if you fail to make your payments. In addition, Chapter 7 bankruptcy doesn’t provide a way for you to catch up on past-due payments.

How Much Equity Do You Have in Your Home?

If your mortgage payments are current, you’ll need to determine how much equity you have in your home. The process for doing this is easy. First, value your home. Next, subtract any outstanding mortgage balance from your home’s value. The equity in your home is the amount you’d keep if were you to sell your home.  

If you don’t have any equity, then your home should be safe—bankruptcy trustees don’t sell houses that don’t have equity. If you do have equity, however, you’ll need to be able to protect it with a bankruptcy exemption to avoid losing your home in Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

If you are behind on your mortgage payments and want to keep your home, filing for Chapter 13 bankruptcy may be an option for you to consider. Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy allows you to catch up on your mortgage payments over the course of a three-to-five-year repayment plan. In addition, if you have more equity in your home than you can protect with a homestead, you can pay your creditors the value of the non-exempt equity in the plan to protect your home. 

Contact a Milwaukee Bankruptcy Lawyer 

If you are considering filing for bankruptcy and want to protect your home, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible for guidance. At Hanson & Payne, our experienced bankruptcy attorneys will guide you through the bankruptcy process and advise you on the best course of action based on your unique situation. Please contact our office today to schedule a free consultation.

Bankruptcy and Your Children

As a parent, you want what’s best for your children. Therefore, if you’re considering filing for bankruptcy, it’s only natural for you to wonder how this might affect them. In this article, we examine the consequences of filing for bankruptcy as a parent. 

Child Support

It can be difficult to keep up with child support payments when you are experiencing financial difficulties. Unfortunately, however, child support is not a debt that can be discharged in bankruptcy. In fact, when your assets are liquidated in a chapter 7 bankruptcy case, a portion of the proceeds go towards child support payments. In chapter 13 bankruptcy, child support payments are incorporated into your repayment plan.

Of course, bankruptcy also provides relief from other debts, and this can free up money to put toward your child support payments. So, ultimately, bankruptcy can actually be beneficial to any children for whom you provide child support. 

Education Contributions 

Bankruptcy can, unfortunately, affect the amount of money you have available to make monthly contributions to your children’s education fund. In most bankruptcy cases, the bankruptcy court will only allow you to allocate funds on necessary expenses. These include things like rent payments, medical expenses, and food. Although your children’s education is important, the court doesn’t consider it a necessary expense. So, if you file for bankruptcy, you may have to temporarily put education payments on the backburner. However, there are some circumstances under which these payments may be permitted, but you’ll need to consult with an experienced Milwaukee bankruptcy attorney to see if this might apply to your situation.

Children’s Savings Accounts

When you file for chapter 7 or chapter 13 bankruptcy, you must disclose all your assets, debts, and liabilities to the bankruptcy court. However, the court usually doesn’t make distinctions between your property and the property of your minor children. Therefore, in order to save your children’s assets (such as savings accounts) from seizure in a bankruptcy filing, you must structure them in a way that will enable you to prove that they are the sole property of your children. One way to accomplish this is to open your children’s bank accounts under either the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). However, if you are seriously contemplating bankruptcy or have already filed for bankruptcy, you shouldn’t take any actions related to your children’s savings accounts without first consulting with an experienced Milwaukee bankruptcy attorney. 

Contact a Milwaukee Bankruptcy Lawyer 

If you need a fresh financial start in Milwaukee, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible. At Hanson & Payne, our experienced bankruptcy attorneys offer bankruptcy and debt negotiation services to individuals throughout southeast Wisconsin. Therefore, if you’re ready to explore your options with an experienced bankruptcy professional, please contact our office today to schedule a free consultation.

Will Bankruptcy Affect My Retirement Accounts?

People often worry that they’ll lose everything in bankruptcy. Nothing could be further from the truth. In fact, bankruptcy allows filers to keep many of their assets, including their retirement accounts. However, a few limitations do exist. In this article, we discuss the effect that bankruptcy can have on retirement accounts and pensions.

You Get to Keep Most Retirement Accounts in Bankruptcy

Bankruptcy exemptions allow filers to keep certain property. Common exemptions include one’s home, car, and household belongings. In addition, nearly all ERISA-qualified retirement accounts and pension plan funds are exempt from bankruptcy. 

Chapter 7 Bankruptcy

If you file for Chapter 7 bankruptcy, you may lose some of your property. However, your retirement funds should be safe due to federal and state laws.

Chapter 13 Bankruptcy

If you file for Chapter 13 bankruptcy, you’ll keep your retirement accounts, and the amount of the balance won’t affect how much you are required to repay creditors in your Chapter 13 repayment plan. 

Fully Protected Retirement Accounts

Although there are a few exceptions, the exemption amounts for the following types of retirement accounts are unlimited, meaning that the entire retirement account is protected:

  • 403(b)s
  • 401(k)s
  • IRAs 
  • Keoghs
  • Money purchase plans
  • Profit-sharing plans
  • Defined-benefit plans

Traditional and Roth IRAs

For traditional IRAs and Roth IRAs, an exemption limitation exists per person. This amount is updated every year, but it is currently over one million dollars. So, if your traditional or Roth IRA exceeds this limit, the bankruptcy court can use the excess funds to pay back your creditors.

Withdrawn Retirement Benefits 

Although creditors can’t touch the funds in your retirement accounts, retirement benefits that you receive as income aren’t exempt.

Chapter 7 Bankruptcy

If you receive monthly payments from a retirement account or pension, the court will consider it income. Therefore, this amount will be included in your Chapter 7 means test qualification. In Chapter 7 bankruptcy, the bankruptcy court can’t take any retirement benefits that you need for your support, but it may be able to take amounts beyond this.

Chapter 13 Bankruptcy

With Chapter 13 bankruptcy, any retirement income you receive will be used to determine what portion of your unsecured debts you have to repay in your Chapter 13 repayment plan.

The Bottom Line

Although most of your retirement funds should be protected when you file for bankruptcy, you shouldn’t attempt to navigate the bankruptcy process alone. In order to ensure that you keep what you’re entitled to in bankruptcy, it is strongly advised that you obtain the services of an experienced bankruptcy attorney. 

Contact a Milwaukee Bankruptcy Lawyer 

If you would like to explore your bankruptcy options in Milwaukee, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible. At Hanson & Payne, our experienced bankruptcy attorneys offer bankruptcy and debt negotiation services for individuals in Milwaukee and southeast Wisconsin. So, if you’re ready to explore your options with an experienced bankruptcy professional, please contact us as soon as possible to schedule a consultation.