Many people think they lose most of their assets when they file bankruptcy. After all, that’s what happens in Monopoly and some other board games. Fortunately, real life is not the same. Most people keep their houses in Chapter 7 bankruptcy. If you’re asking can I keep my house in Chapter 7 bankruptcy, odds are the answer is yes.

Mostly because of the coronavirus pandemic, the foreclosure rate has dipped overall. But Georgia has one of the highest rates in the county. Additionally, lenders are foreclosing faster than ever before. So, if you are behind on payments in Georgia, there is a good chance your home is at risk. If that’s true, the bank could quickly seize it, leaving you with nothing to show for all the payments you have made.

If your house is at risk, now is the time to reach out to a Georgia bankruptcy lawyer. Bankruptcies generally stop foreclosures without much of a problem. However, it is very difficult to undo a foreclosure. Additionally, a Georgia bankruptcy lawyer can unlock some advanced money-saving options. The sooner you start the process, the sooner you can reduce your monthly payments.

The Automatic Stay in Georgia Bankruptcy

Typically, mortgage lenders were rather patient with homeowners during 2020, mostly for PR reasons. Once these deferrals expire, these lenders will have very little patience with homeowners who suddenly find themselves four or five months delinquent.

No matter how far behind you are, and no matter what demands the lender makes, the Automatic Stay instantly stops:

• Foreclosure,
• The issuance of an acceleration notice, and
• Harassing collections efforts.

The Automatic Stay technically prohibits all communication between debtors and creditors. Therefore, many creditors stop sending statements and also suspend ACH payment arrangements. But the Automatic Stay does not affect the obligation to make payments. If an owner fails to make payments, the lender could ask the judge for permission to bypass the Stay.

Section 362 of the Bankruptcy Code also applies to other adverse creditor actions, such as eviction, wage garnishment, bank account levy, and repossession.

Homestead Exemption in Georgia

The Peachtree State has a $21,500 home equity exemption. People who have lived in their homes for less than five years almost always have under $21,000 in equity. Owners who have occupied the same home for less than ten years normally have less than $21,000 in equity. That’s because mortgage loans are amortized. The bank applies monthly payments to prepaid interest before it applies them to the UPD (Unpaid Principal Balance).

If the exemption limit is an issue, an experienced Georgia bankruptcy lawyer can use one of several workarounds.

Georgia’s Bankruptcy Wildcard Exemption

Georgia has a wildcard exemption. This exemption can protect otherwise nonexempt property, including excess home equity. Furthermore, the exemption amount doubles for married filers.

On a related note, a tenancy of the entirety might be an option. It is illegal for creditors to seize one person’s property to pay another person’s debts. Therefore, if Wife designates Husband as a tenant of the entirety before she files bankruptcy, a creditor cannot seize the house to pay Husband’s debts, regardless of the equity amount.

Proper home valuation could be an issue as well. The as-is cash value of a $200,000 might be as little as $20,000, especially if the house needs major repairs.

Only a Georgia bankruptcy lawyer should deal with workarounds like these. Abnormal financial activity prior to filing and undervaluing an asset on Schedule A are both forms of bankruptcy fraud. So, if you do these things incorrectly, there could be serious consequences.

Advanced Options During Chapter 7 Bankruptcy in Georgia

Chapter 7 does more than protect your home in the short term. It could also make it more affordable in the long term. Many people have seen their home’s values decline. This decline usually traps them in an unfavorable mortgage note. Bankruptcy turns the tables in this area.

Reclassification Option

Assume Janet used 80/20 financing to buy a $500,000 home. She has a $400,000 senior note and a $100,000 junior note. If her home is worth less than $400,000, its value is not high enough to secure both loans. Therefore, a judge could declare that the junior lien is a dischargeable unsecured debt. That reclassification could save Janet thousands of dollars a year for the next decade or more.

Cram-Down Option

Another advanced option, a cram-down, is also available in a Chapter 7. If the owner pays the item’s current fair market value before the bankruptcy ends, the lender must tear up the note.

Let an Athens Bankruptcy Lawyer in Georgia Show You Your Options

Are you asking, Can I keep my house in Chapter 7 Bankruptcy? Yes, most often you can keep your house in a Chapter 7. For a free consultation with an experienced Georgia bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. Convenient payment plans are available.