Arizona residents who are considering filing Chapter 7 bankruptcy might have reservations about doing so because they fear losing their homes. When people file for Chapter 7 bankruptcy, their homes could be sold to pay off debts if there is equity in the home. However, cases cannot remain open for an indefinite amount of time in hopes that the equity of the home will increase.
When people file for bankruptcy, a trustee is assigned to their cases. The trustee conducts an investigation into any of the filer’s unprotected assets in attempts to sell them to their creditors. If an individual has value in their home, trustees could claim that there is a value issue in their case before allowing them to receive their Chapter 7 bankruptcy relief.
Yet, typically, Chapter 7 bankruptcy cases are settled within three to six months after people file their cases. Furthermore, after cases are settled, they cannot be reopened years later merely because properties have accrued value. Bankruptcy would not be a viable option for many people from their debt relief if trustees were allowed to keep their cases open for years in the hopes of their homes gaining equity.
Bankruptcy basically requires a full disclosure of an individual’s assets on the date that they file, including their bank account balances, any retirement accounts, vehicle value and property value. However, home value is considered ‘real value.” Therefore, a bankruptcy case could be held open for a few additional months to see if the value of the property increases, especially if someone chooses to file their bankruptcy on the borderline of being able to protect their home’s equity. However, even if cases are kept open to see if property value continues to rise, trustees must make active efforts during that time period to sell the home. A Phoenix bankruptcy lawyer will be able to assist someone in ensuring that their home is protected when they file for bankruptcy.
Source: FOX Business, “How Safe is My Home in Chapter 7 Bankruptcy?“, Justin Harelik, August 21, 2013