Bankruptcy is one of the most humbling experiences a person or company might go through. In the country, there are two types of bankruptcies that private individuals file for: chapter 7 and chapter 13. Although the term ‘bankruptcy’ does conjure up highly negative images of being homeless or destitute, it’s actually a lot more common than most people think: in fact, more than a million people in the country file for bankruptcy every year.
That’s because bankruptcy isn’t just a fancy way of saying that you’re broke; rather, it’s a legal tool that allows individuals a certain amount of debt relief. Most of the time, people file for bankruptcy in order to re-organize their finances, take a breather from debt such as credit cards, medical bills, or mortgages, and figure out a way they can move forward. This is good news for people who want to sell their house fast in Warren, MI just to pay off their debt: you don’t have to do that to pay off your debtors (although selling it to turn a profit isn’t a bad idea either).
But even though it’s a legal tool for debt relief, many people are afraid of how bankruptcy can affect their property’s value. In Warren, Mi, the process of bankruptcy is, thankfully, roughly the same as in other parts of the state. That being said, it’s important for people to know what exactly happens to your property’s value if you decide to file for bankruptcy.
Does Bankruptcy Affect Your Property’s Value In Warren, Mi? Here’s The Bottomline…
Let’s make one thing clear: filing for bankruptcy does not automatically mean you lose your house, even if it’s mortgaged. That being said, it also doesn’t fully protect you from foreclosure. Filing for bankruptcy does, however, delay the foreclosure process for a fair amount of time, and in some cases, actually allows you time to repay most of your mortgages anyway.
But does filing for bankruptcy affect the future of your property’s value? Not exactly: your property’s value will be cited as its fair market value on the day you file for bankruptcy. The value is not going to be determined by your homeowner insurance provider, nor will it be provided by tax assessor (although their assessment is usually used as a good starting point for most courts).
Remember that property values go up and down over time; however, fair market value refers to the price that a buyer will pay for your property based on the property’s current conditions and the value of other properties in the area in comparison.
If You Do File for Bankruptcy, Choose Which Chapter To Go For
The “Chapters” people talk about when filing for bankruptcy refer to the chapters in Title 11 of the United States Code. In general, there are two main ways that a private individual can file for bankruptcy: invoking either chapter 7 or chapter 13. Filing for either one requires fulfilling different, specific requirements to qualify, and requires the filer to fulfill different, specific duties to both the court and their debtors.
Chapter 7 is usually considered as the quickest way to get some form of debt relief because Chapter 7 usually involves the court issuing a “bankruptcy discharge”, that is, an official court order that eliminates most of your dischargeable debt within 3-4 months of you filing for bankruptcy.
However, that’s only if you can prove to the court that your current means of income can no longer pay for your debt, and only if your property is exempted. This is because, in a Chapter 7 bankruptcy, one of the first things the court tries to do is to sell off your property in order to pay off your lenders.
This is why, in a Chapter 7, you need to determine whether your property is exempt from this liquidation. In Michigan, there are various legal factors that can determine whether your property is exempt, and it is best for you to speak with a lawyer regarding these.
Meanwhile, a Chapter 13 bankruptcy usually involves the court working both with you and your lender to determine a repayment scheme that can allow you to pay off a portion of your original debt, with the rest being eliminated completely. This is usually filed for by people who may have too much money to qualify for Chapter 7, or for those people who fear their property might be non-exempt from liquidation.
Chapter 13 is usually accomplished by the court creating a budget plan based off of your current income and your current living expenses. They then take what little disposable income you have and order you to pay it to your lender for a set number of months or years. Once this is accomplished, your remaining dischargeable debts are wiped out.
Choosing the right kind of bankruptcy can determine whether you’ll be able to keep your property or whether you run the risk of having it sold off to pay your lenders, so choose wisely.
Don’t Worry, We’re Here to Help
We here at Select Home Solutions pride ourselves not just of our expertise in real estate, but our commitment to providing our clients with the right kind of service. If you’re thinking about selling your house fast in Warren, MI because of bankruptcy issues, get in touch with us so we can advise you on the kind of steps we think you should be taking. Contact us, today, and one of our expert real estate agents will get back to you ASAP.