What will happen to my positive equity if I file for bankruptcy? 3 Answers as of August 27, 2010

If I file for chapter 7 bankruptcy, what will happen to the positive equity that I currently have in my house?

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Diefer Law Group, P.C.
Diefer Law Group, P.C. | Abel Fernandez
This depends on how much equity you have. You can only protect certain amount of equity in a home. If you exceed that amount, the court can sell your home.
Answer Applies to: California
Replied: 8/18/2010
Law Offices of Michael J. Berger
Law Offices of Michael J. Berger | Michael J. Berger
This depends on how much equity you have, how many family members are in your household, how old you are, and whether or not you are disabled. If the amount of equity is equal to or less than the homestead exemption, the debtor keeps the property and the equity therein (assuming that the property is not being lost in foreclosure, which is another subject).

Here is a brief summary of current California law re homestead exemptions: Real or personal property you occupy including mobile home, boat, stock cooperative, community apartment, planned development, or condo to $75,000 if single and not disabled; $100,000 for families if no other member has a homestead (if only one spouse files, may exempt one-half of amount if home held as community property and all of amount if home held as tenants in common); $175,000 if 65 or older, or physically or mentally disabled; $175,000 if 55 or older, single, and with gross annual income under $15,000 or married and gross annual income under $20,000 and creditors seek to force the sale of your home; forced sale proceeds received exempt for 6 months after; separated but married debtor may claim homestead in community property still occupied by other spouse. (Husband and wife may not double).

In addition, when looking at selling real property of the debtor, Trustees and Judges typically also consider costs of sale, including commissions and fee. Sales are not forced unless there will be a dividend for the creditors over and above the homestead exemption and the costs of sale.
Answer Applies to: California
Replied: 8/18/2010
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