What Happens to Your Home During Bankruptcy in Ohio?

If the petitioner is current on their home’s mortgage payments and then files for Chapter 7 bankruptcy in Ohio, chances are good that they will be able to keep the asset. Some individuals may lose their home when high levels of equity are present. The equity is considered to “have value” and may be used to pay off creditors.

However, the amount of equity must be $145,425 greater than any mortgages owed on the home. If the home doesn’t have this level of equity, it may not be sold to repay creditors. The bankruptcy court in Ohio considers the property to have “no value” and, therefore, the asset won’t be liquidated to repay creditors.

Equity as a Determining Factor in Bankruptcy

Ohio law offers an exemption that enables many petitioners to proceed with their Chapter 7 bankruptcy, even in those cases when equity exists in the property. Subtle differences exist in the decision to file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy in Ohio:

• Chapter 7 bankruptcy, also known as a liquidation bankruptcy, offers the debtor h protection from their creditors. Included in exemptions offered under Ohio law, the petitioner may quality for the homestead exemption in a Chapter 7 bankruptcy. In this scenario, the bankruptcy trustee may liquidate any nonexempt assets of value to repay creditors. If the net home equity isn’t greater than the exemption, and the petitioner stays current in mortgage payments, they’re more likely to retain the property. Working with a skilled bankruptcy lawyer is essential to ensure that the home’s net equity is correctly calculated.

• Chapter 13 bankruptcy, also known as a debt reorganization/repayment plan, allows the individual to retain assets as long as agreed-upon payments are made. For instance, it’s likely that the petitioner may keep their home in Chapter 13 because the bankruptcy trustee includes the amount of money owed to the mortgagee in the repayment settlement. During the course of the repayment plan of three – five years, the petitioner must meet both the trustee’s payments and mortgage payments.

Chapter 7 Bankruptcy When the Petitioner Owes Mortgage Payments

If the petitioner files a Chapter 7 bankruptcy in Ohio and is in arrears on mortgage payments, the mortgagee may move to foreclose on the property. For that reason, it’s important for the petitioner to keep current on mortgage payments in Ohio. The petitioner isn’t advised to file a bankruptcy under Chapter 7 when mortgage payments are past due if they want to retain the residence.

Chapter 13 Bankruptcy and Mortgage Payments

Similarly, if the petitioner files a Chapter 13 bankruptcy in Ohio and is current on mortgage payments, they must continue to make timely payments (either themselves or through a bankruptcy trustee).

If the debtor files a Chapter 13 bankruptcy in Ohio and is in arrears on mortgage payments, the petitioner and attorney must devise a payment plan to bring all past due payments and property taxes current over a three to five year period. The petitioner is allowed to remit these payments without the addition of interest charges and late fees. The Chapter 13 bankruptcy is the best option to save your home if you are behind on payments.

If a second mortgage was written on the property, it may be possible to eliminate tit through the Chapter 13 bankruptcy. The petitioner may stop a foreclosure and have more time to keep the property. The mortgage lender can’t refuse to accept payments because of the protections afforded by the Chapter 13 bankruptcy. Again, it’s essential to make timely payments in full (either directly by the petitioner or through the bankruptcy trustee).