May 30, 2023

How Bankruptcy Can Help You Keep Your House in California

If you're a homeowner in California and facing overwhelming debt, you may worry about losing your home. Fortunately, bankruptcy can help you keep your house, but it's important to understand the process before making a decision.

Read more to Explore how bankruptcy can affect homeownership, the difference between Chapter 7 and Chapter 13 bankruptcy, selling your house to avoid bankruptcy, and when to consider bankruptcy as a last resort.

Bankruptcy and Its Impact on Homeownership

Bankruptcy is a legal process that allows individuals and businesses to eliminate or restructure their debt. The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13.

  • Chapter 7 bankruptcy is a liquidation process that allows you to eliminate most unsecured debts, such as credit card debt and medical bills.
  • Chapter 13 bankruptcy is a reorganization process that allows you to repay your debts over a period of three to five years.

When you file for bankruptcy, an automatic stay goes into effect, which stops most collection actions, including foreclosure. This means that if you're facing foreclosure on your home, filing for bankruptcy can temporarily stop the process and give you time to catch up on missed mortgage payments.

Can Bankruptcy Help You Keep Your House?

If you're behind on your mortgage payments, filing for Chapter 13 bankruptcy can help you catch up on missed payments and keep your house. Under Chapter 13, you'll make a monthly payment to a bankruptcy trustee, who will use the money to pay your creditors, including your mortgage lender. As long as you make your monthly payments, you'll be able to keep your home.

If you have a lot of equity in your home, filing for Chapter 7 bankruptcy may not be the best option. In California, you can exempt up to $75,000 of your home's equity if you're single, or up to $100,000 if you're married and filing jointly. If you have more equity than the exemption amount, the bankruptcy trustee may sell your home to pay your creditors.

The Difference Between Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 bankruptcy is a quicker process than Chapter 13, typically taking three to six months to complete. However, not everyone qualifies for Chapter 7. To qualify, you must pass the means test, which compares your income to the median income in California. If your income is below the median, you qualify for Chapter 7. If your income is above the median, you may still qualify if you pass a second test that looks at your disposable income.

Chapter 13 bankruptcy is a longer process, taking three to five years to complete. However, it allows you to keep your assets, including your home, as long as you make your monthly payments to the bankruptcy trustee.

Alternatives to Bankruptcy - Selling Your House to Avoid Bankruptcy

If you're struggling to make mortgage payments and considering bankruptcy, selling your house may be an option to avoid foreclosure and bankruptcy. There are two main ways to sell your house to avoid bankruptcy: through a traditional sale or a cash sale.

A cash sale is when you sell your house to a real estate investor for cash, typically at a discounted price. The main advantage of a cash sale is that it's a quick and easy process, with no need to list your house or deal with real estate agents. You'll also avoid costly repairs and renovations, as cash buyers typically purchase houses as-is.

Benefits of Selling Your House Before Filing for Bankruptcy

If you're considering bankruptcy, selling your house before filing can have several advantages.

  • Pay off your mortgage and avoid foreclosure.
  • Have more control over the sale process and can negotiate a higher price than if you sold your house through bankruptcy.
  • Avoid the negative impact that bankruptcy can have on your credit score.

When to Consider Bankruptcy as a Last Resort

While bankruptcy can help you keep your home and eliminate debt, it should be considered as a last resort. Bankruptcy will have a negative impact on your credit score and can stay on your credit report for up to ten years. It may also affect your ability to obtain credit in the future, including loans and credit cards.

Before filing for bankruptcy, consider alternative options, such as debt consolidation, credit counseling, and negotiating with your creditors. If these options aren't feasible, bankruptcy may be the best option to get a fresh start and keep your home.

If you're a homeowner in California facing overwhelming debt, bankruptcy may be an option to help you keep your home. However, it's important to understand the process and consider all your options before making a decision. Selling your house for cash may also be an option to avoid foreclosure and bankruptcy.

Contact Our Cash Home Buyers in Riverside

If you need to sell your house fast but don’t want the hassle of a traditional home sale, contact Vista Buys Homes. We buy houses as-is. No repairs are needed. Avoid closing costs and realtor commissions. Close in as little as seven days. Call 909-818-0448 to get a guaranteed cash offer on your home from our local home buyers in California.

    Get Your Fair And Honest All-Cash Offer Today! No Obligations!

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