Can I Keep My House with Bankruptcy in Arizona?
We all need a place to live, and no one wants to lose their home. Although bankruptcy can provide a way to discharge overwhelming debt and make a fresh start financially, many people hesitate to file for fear of becoming homeless in the process. If you are in this situation, consult an experienced Arizona bankruptcy lawyer as soon as possible. It may be possible to file for bankruptcy and keep your home.
What Are the Different Types of Bankruptcy?
Individuals in Arizona may be eligible to file either of two different types of bankruptcy:
Chapter 7
Filing for Chapter 7 bankruptcy can give you a fresh start if the burden of consumer debt has become too great. Unsecured debt, such as credit card balances, unpaid utility bills, and medical bills, may be discharged completely. After you file, your debts are assigned to a trustee with the authority to sell off your unprotected assets and distribute the proceeds among your creditors.
The protected assets you are allowed to keep include up to $15,000 in vehicle equity and up to $400,000 in home equity. These amounts are doubled when you file as a married couple for vehicle equity, not home equity. If your monthly household income is less than the median income for a household of your size, or if your disposable monthly income (income minus allowed expenses) is under a certain amount, you may be eligible to file for Chapter 7 bankruptcy.
Chapter 13
Also known as a wage earner’s plan, Chapter 13 is a type of reorganization that allows debtors with regular income to repay a portion of or all of their debts. Under this bankruptcy chapter, debtors propose a repayment plan in which installments are made to creditors over a three to five-year period.
One main advantage of Chapter 13 is that it enables debtors to stop foreclosure proceedings and, in some cases, cure delinquent mortgage payments over a period of time. It can also make it possible to reschedule other secured debts, such as car loans, and extend them for the life of the plan, lowering payments.
What Is the Arizona Homestead Exemption?
Under Arizona law, any person eighteen years of age or older who resides within the state may hold as a homestead, exempt from execution and forced sale, interest in his or her home not exceeding $400,000 in equity. This is known as the homestead exemption. It means you may be able to protect up to $400,000 of equity in a home you own if you file for bankruptcy.
However, with recent changes in the law, as of 2022, civil judgments attach to any real property owned by debtors, including a homestead. Any judgment entered for any amount becomes an encumbrance on real property that must be paid before clear title can transfer to a buyer or in a refinance.
How Can Mortgage Arrears Affect Your Ability to Keep Your Home?
If you have fallen behind on your mortgage payments or your home is in foreclosure, it may help to file Chapter 13. Your mortgage arrears can be included in your repayment plan, enabling you to become current on your mortgage over time. Depending on your income, the amount of your debt, and other circumstances it may allow you to avoid the risk of foreclosure or to stop current foreclosure proceedings.
Our Phoenix bankruptcy attorneys at Hilltop Law Firm can help you understand how filing bankruptcy can impact your life and each of your assets, including your home. Contact us at (602) 466-9631.