Chapter 7 bankruptcy can be incredibly helpful for people going through temporary financial challenges. They can eliminate some of their debt and stop aggressive and embarrassing collection efforts. A bankruptcy filing can help people address the possibility of foreclosure and creditor lawsuits.
However, there are trade-offs during the Chapter 7 bankruptcy process that may leave people worried about pursuing this type of bankruptcy. Typically, filers have to make disclosures about their resources. In some cases, they may have an obligation to liquidate some of their assets. The trustee overseeing the bankruptcy case may have them sell certain property or withdraw funds from financial accounts to repay some of their creditors before they become eligible for a discharge.
People contemplating bankruptcy often feel anxious about their most valuable assets. For homeowners, the real property they own may be the asset they feel most strongly about protecting. Is a primary residence at risk during a Chapter 7 bankruptcy?
Filers have exemptions available
State statutes and federal regulations outline the assets that people seeking Chapter 7 bankruptcy relief can preserve throughout the process. By reporting their assets and declaring their intention to use certain exemptions, filers can protect key resources from liquidation. The exemption for home equity can prevent the forced sale or refinancing of real property
Instead of focusing on the amount of equity, the Texas Homestead Exemption allows a property owner to protect a certain amount of acreage and the improvements erected on it, provided that the property is their primary residence. Those living in an urban area can protect up to 10 acres. Those in rural communities can exempt up to 100 acres as an individual or double that if they live on the land with their family.
The ability to preserve multiple acres of land and the improvements on that land can help people ensure that they have the resources they need to rebuild financially after a personal bankruptcy filing. People who retain their residences can rebuild their lives more effectively after a successful bankruptcy filing.
Reviewing assets and debts with a skilled legal team can help those considering a Chapter 7 bankruptcy determine the best path forward. The proper use of exemptions can help people preserve most or all of their property by protecting it from liquidation.
