Any homeowner who is heavily in debt and can’t see a way out may be forgiven for having a panic attack, especially when the family home is at risk. It’s a double whammy when, in addition to all your other debts, you’ve been late on your mortgage and your lender is threatening foreclosure.
So what do you do?
- Selling quickly to repay the lender. This can work, but if you can’t sell fast or don’t get your price, you could be in even more trouble. A real danger of a short sale that doesn’t raise adequate funds is a deficiency judgment on the difference between what you owe and are able to pay after selling.
- Agreeing to a deed in lieu of foreclosure. This saves the trauma and stigma of foreclosure, but it isn’t your only option, and certainly may not be the best one available to you.
- Foreclosure; which means that the lender will repossess your home!
It might seem like bankruptcy is the option to take when all else fails, but in fact, this is not true at all. Many times bankruptcy is the very best option, particularly if you are a homeowner. In fact, bankruptcy may be the only way you can save your home. But you’re going to need a good Atlanta bankruptcy firm to help you.
Federal Bankruptcy Laws
Bankruptcy in the United States is governed by the US Bankruptcy Code, which, amongst other things, details a number of different types of bankruptcies that are titled according to their chapter in the Code. Individuals have two options, Chapter 7 and Chapter 13, depending on their specific situation.
Generally, Chapter 7 allows debtors to start afresh financially because it provides for the liquidation and sale of all unsecured debts and non-exempt property. The proceeds are then distributed amongst creditors.
Chapter 13, on the other hand, provides for an adjustment of debts and results in a payment plan that lasts between three and five years. To qualify, you need to have an income that proves you will be able to make the necessary repayments.
The equity you have in your home (and of course what you owe the bank) will determine whether a Chapter 7 or Chapter 13 bankruptcy is best.
Georgia Bankruptcy Laws
While federal laws govern bankruptcy in Georgia, there are some differences between the exemptions that apply to Georgia residents. In some states that have their own exemptions, people have the choice between these and the federal exemptions, but in Georgia, there is no choice. Only the Georgia exemption laws apply.
When it comes to your home, the Homestead Exemption is the most important one. It is automatic and will enable you to exempt up to $21,500 of your equity. An additional wildcard exemption of $5,000 may be added to the Homestead Exemption, increasing the total to $22,000. If your equity in the property is greater than this, Chapter 7 bankruptcy won’t work for you because the trustee will be able to sell the “homestead” to pay creditors.
Chapter 13 is recognized as an excellent way to stop foreclosures on property and to reinstate mortgages. So if a Chapter 7 doesn’t work, a Chapter 13 will.
This is a simple explanation of your options. We have a team of attorneys in our Atlanta bankruptcy firm that can help you determine what will benefit you best. Call to set up a consultation.