What Happens to Your Home in Michigan Bankruptcy?

Filing for bankruptcy can be a daunting experience, especially when it involves your home. Understanding what happens to your property in Michigan bankruptcy is crucial for homeowners facing financial difficulties.

In Michigan, there are two main types of personal bankruptcy: Chapter 7 and Chapter 13. Each type has different implications for homeownership.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as liquidation bankruptcy. In this process, a court-appointed trustee evaluates your assets and may sell non-exempt assets to pay off creditors. However, many homeowners are concerned about their houses when filing for Chapter 7.

Fortunately, Michigan offers homestead exemptions that may protect your home. As of 2023, the exemption amount can be up to $39,300 for an individual and $78,600 for a couple filing jointly. If the equity in your home is below this exemption limit, you can keep your house. If the equity exceeds the exemption, the trustee may sell the house, but you will receive the exemption amount before any creditors are paid.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is often referred to as a reorganization bankruptcy. This option allows individuals to keep their homes while establishing a repayment plan to pay off debts over three to five years. Homeowners in this situation can catch up on missed mortgage payments and protected from foreclosure during the repayment period.

One significant advantage of Chapter 13 in Michigan is that it allows homeowners to retain their property as long as they remain compliant with the repayment plan. Failure to adhere to the plan could result in losing your home, so it's essential to work with a reliable bankruptcy attorney to ensure you stay on track.

Risk of Foreclosure

Regardless of the bankruptcy chapter chosen, homeowners should be aware that filing for bankruptcy does not eliminate the risk of foreclosure. While bankruptcy can temporarily halt foreclosure proceedings through an automatic stay, if you fall behind on mortgage payments again, the lender can pursue foreclosure after the bankruptcy case concludes.

It's also important to note that if your mortgage is current, you can keep making payments post-bankruptcy to keep your home. However, if you're unable or unwilling to make payments during or after bankruptcy, you might risk losing your property.

Consulting a Bankruptcy Attorney

Understanding the nuances of bankruptcy law in Michigan is vital for homeowners. Consulting with a knowledgeable bankruptcy attorney can provide clarity on the options available to you and how best to protect your home. They can help you evaluate your financial situation, assess the exemptions applicable to your property, and guide you through the bankruptcy process.

Conclusion

In summary, what happens to your home in Michigan bankruptcy depends on various factors, including the type of bankruptcy filed and the equity in your home. With the right legal guidance and a clear understanding of your options, you can navigate this challenging landscape and work towards keeping your home while managing your debts.