Chapter 7 bankruptcy is something you could use if you are in bad financial shape and do not earn a great deal of money. Through this type of bankruptcy, you may have the option of keeping the home you own or surrendering it. While there are times when keeping it might be better, here are three reasons you may want to consider giving up your home in your Chapter 7 case.
You do not have a lot of equity in the home
One of the factors that can affect whether the trustee allows you to keep your home in Chapter 7 is the amount of equity you have in the home. When a homeowner has very little equity, the trustee will often approve letting the person keep the home. Trustees typically only want homes in Chapter 7 cases when there is equity in them.
If you are allowed to keep your house but do not have a lot of equity in it, giving up the house can be a lot easier. It can also be a good idea to surrender a house that has little equity just to get out from underneath it. Filing for bankruptcy is a great way to get out of a house you do not really want, and this is one of the top reasons people surrender their homes willingly in bankruptcy cases.
You are behind on the payments
A second reason to consider giving up your home is to avoid having to work out a deal with your lender if you are behind on your payments. For you to keep your house in Chapter 7, you must be able to catch up on all past-due payments and fees. Your lender might be willing to work with you on this, but it may still require coming up with some cash for the missed payments. If you have no way to catch up on these payments, it might just be easier to get rid of the house.
You have property tax liens on the property
The other reason it might be better to get rid of your house is to eliminate debts owed for property taxes. If you failed to pay any of your property taxes, the state you live in may have placed liens on your property. If you keep the house you own in your bankruptcy case, you will have to pay these liens. If you give it up, you most likely will not be required to pay them.
Getting out of debt through bankruptcy is a great option for many people, but you might have to make some big decisions like this. If you are not sure if bankruptcy is right for you, visit a bankruptcy lawyer like Thomas K Mast today.