People who find themselves considering bankruptcy due to financial hardship often worry about the long-term implications of bankruptcy. Misinformation abounds on this topic, and many people are quick to claim that filing bankruptcy means losing your home.
While it is true that Chapter 7 bankruptcy proceedings may sometimes require the liquidation or sale of assets to repay creditors before a discharge, that doesn’t necessarily mean that you will lose your home just because you need debt relief. Quite a few people actually use bankruptcy to protect their status as homeowners by reducing their debt load and preventing aggressive collection tactics.
Homeowners can exempt some property value when they file
The goal of bankruptcy is to help people regain their financial footing, not to put them in a position where they are even worse off than they were when they started.
Losing your home combined with bankruptcy marks on your credit report could make it almost impossible for you to find a new place to live, especially if you want to stay in the same neighborhood or school district.
Thankfully, those who file Chapter 7 proceedings have the right to exempt a certain amount of their home equity from liquidation. Ohio has drastically different property values in different communities, so the amount of equity that you can exempt will depend on the county where you live.
Many Ohio residents outside of urban areas can exempt about $75,000 worth of home equity, although those in the most competitive real estate market and potentially exempt up to $150,000 in equity.
Reviewing your financial situation, including the equity in your home, can help you make more informed decisions about whether Chapter 7 bankruptcy is the right solution for you.