Filing Chapter 7 Bankruptcy When You Own Multiple Homes

Can you file Chapter 7 bankruptcy if you own multiple homes?

If you own multiple homes, such as your primary residence and a vacation home, you may still be able to keep both when you file for Chapter 7 bankruptcy in Michigan. However, if you own two or more houses, you will need expert guidance when filing for bankruptcy in Michigan.

Chapter 7 Exemption Rules & Multiple Properties

Under Chapter 7 bankruptcy, your primary residence is considered a homestead. As a homeowner, as long as you have $40,475 in equity or less, you can keep your home, but if you are 65 or older, you can have up to $60,725 in equity. One important caveat is that you must be current on your payments or have the means to pay any missed payments.

Married couples may want to use a federal exemption that allows them an equity amount of up to $50,300 per couple. If the homestead does not use the total equity amount, the excess can go towards exempting a second property. The use of the federal exemption for a property requires people to use federal exemptions for all other assets and this may not benefit all filers.

According to Michigan Bankruptcy law, homeowners may also save a second property with the $3,500 asset exemption allowed in Michigan. The law allows the exemption to apply to real property if it is not in the same city as the homestead or includes over 40 acres of land.

Property owners with a valuable property that exceeds the exempted amount or who have too many properties to preserve under a Chapter 7 bankruptcy should file for Chapter 13 protection instead. Chapter 13 requires a repayment plan with creditors rather than a discharge of the debt, but it enables the debtor to keep more of their assets.

Know The Risks of Keeping More Than One Home in Bankruptcy

Sometimes, keeping a house isn’t the best option during bankruptcy. If the equity in the home is higher than the amount protected by law, the homeowner might need to pay the extra to the creditor to keep it. This can mean using up all available cash or selling something else, like a car, which could cause more problems later.

Multiple homes in Chapter 7 bankruptcy

To keep any property, people must show they can repay their loans. Even if they have the income to pay after clearing other debts, the loan payments might still limit their future plans.

In a Chapter 7 bankruptcy, the person must catch up on their mortgage and stay current during the process. For Chapter 13, they must include any missed payments and fees in their repayment plan or negotiate to reduce or remove them.

Another issue is that creditors can take property, including a house with a homestead exemption, if it was used as collateral for a loan being discharged. The law allows creditors to sell property to pay off debts.

Look Into Other Options For Your Bankruptcy Case

Chapter 11 bankruptcy is a good choice for property owners with several properties or valuable assets. It is commonly used by businesses to set up better debt repayment plans, but individuals can also use it. Chapter 13 bankruptcy is for people with up to $1,081,400 in secured debt and $360,475 in unsecured debt. Chapter 11 is helpful for those who owe more than these limits.

Chapter 11 gives filers more time to pay back overdue loans. It’s also useful if you owe more on a loan than the property is worth, as repayment plans are often based on the current market value of the property rather than the loan balance.

Deciding whether to keep or let go of property during bankruptcy depends on many factors. Each situation is unique, so it’s important to get advice to improve your financial future.

If you need help deciding whether Chapter 7 bankruptcy is right for you, schedule a free consultation with The Mitten Law Firm today.

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