The U.S. Bankruptcy Code provides property owners a homestead exemption; this means that you may keep your primary residence even if it has some equity value. Michigan residents may choose between the federal or state exemption, and you may opt for whichever offers the higher dollar amount.
The homestead exemption generally protects your property’s equity from a financial institution threatening to foreclose, as noted by Bankrate.com. An exemption places a limit on how much of your assets creditors may claim, which includes the equity in your home.
May I use the homestead exemption with a mortgage?
The court may require you to sell your home or refinance a mortgage when you have enough equity to repay your creditors. Some Michigan filers, however, mistakenly believe that bankruptcy always results in a loss of property.
If your home’s equity does not fall outside of the amount allowed by the exemption, you may keep it with a Chapter 7 bankruptcy petition. You may need to provide documentation that you are current on your mortgage payments.
May I keep my home if my mortgage payments are not current?
As long as your equity value does not exceed either the state or federal homestead exemption, you may continue owning your property. Without having kept your mortgage current, however, you may consider filing a Chapter 13 bankruptcy petition, which requires a payment arrangement.
You may have an option to create a workable financial plan to repay your creditors. Depending on your income, a bankruptcy may help you catch up on your past due bills while maintaining ownership of your home.
Homeowners have a right to protect their property and may decide on filing a petition using a state or federal homestead exemption. You may work with the court to either discharge your debts or repay your creditors while keeping your home.