Can I Keep My House If I File for Bankruptcy?
When you file for bankruptcy a trustee is appointed and it is the trustee’s job is to seize any non-exempt assets that you have, sell those assets off, and use that money to pay your creditors. With regard to your house, the main question is: is my house exempt (meaning that the trustee cannot take it) or is my house not exempt (meaning that the trustee can seize it, sell it, and use the money to pay my creditors)? What the answer comes down to is the amount of equity that you have in the house. In Colorado, as in most states, there is something called a homestead exemption. That means that if you live in a house, you are entitled to up to a certain amount of equity that cannot be seized by your creditors or by the trustee in a bankruptcy.
In Fort Collins, and all of Colorado, the exemption amount is normally $75,000. You are entitled to $75,000 in equity in your house, before any of that equity can be seized by the bankruptcy trustee or taken by your creditors. If you are over the age of 60, or if you are disabled, that amount increased to $105,000. If you have considerably more than $75,000 or $105,000 if you are over 60 or disabled, then you could potentially run into issues with regard to your house in filing bankruptcy.
Also, if you do intend to keep your house, you will have to continue making the mortgage payments. It is not possible to discharge the mortgage in a way that removes the security interest they have in your house. In order to keep your house, you would have to continue making any mortgage payments—that includes first mortgages, second mortgages, home equity lines of credit, any sort of secured property interest.
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