If homeowners can no longer pay their outstanding obligations, one of their resources is to file for Chapter 7 bankruptcy. It aims to relieve their debts and have a fresh start. However, when they file for bankruptcy, their assets will be liquidated to repay the creditors, and these may include their vacation homes.Fortunately, if a vacation home is in jeopardy because of bankruptcy, homeowners may be able to save it by taking certain steps. Ultimately, the types of exemptions that homeowners can use to protect or save Your Vacation Home From Bankruptcy will depend on the state.Although Chapter 7 bankruptcy protection often helps protect primary residences under certain circumstances, it’s often challenging to save a vacation home if it has significant equity.
If you’re filing for bankruptcy, read on to learn how to save your vacation home from this legal proceeding.
Typically, Chapter 7 bankruptcy protection can protect a homeowner’s primary residence, provided they are able to exempt the home’s equity or have invested an insignificant amount of equity in the home. If a homeowner has significant equity in their vacation home, they may not be able to save it with Chapter 7 bankruptcy protection.
When filing for Chapter 7 bankruptcy protection, the property will enter into a bankruptcy estate. At this point, a designated bankruptcy trustee will be responsible for selling nonexempt property in this estate, which pays back the debt owed to creditors. If a homeowner owns a vacation home in addition to their primary residence, and the state they live in allows for an exception, they may have the chance to use this toward saving their vacation home.
Specifically, homeowners need to live in a state with a wild card exemption, which is a type of exemption that enables homeowners to save a certain amount of the property that they own. To determine how a state’s unique wild card exemption works and the rules governing it, it’s best for homeowners to speak with a bankruptcy attorney for more information. An attorney may also be able to detail which exemption options will provide them with the largest amount of money.
However, before tackling the exemption options, an experienced legal professional will determine if they qualify for Chapter 7 bankruptcy. It’s crucial to understand that not all individuals or entities may file for bankruptcy. If a homeowner plans to declare bankruptcy, they must pass the means test first. It’s designed to know if they have disposable income to cover their debts. If they pass the test, then they’re eligible to file for Chapter 7 bankruptcy.
However, if their goal is to save their vacation home from bankruptcy, they should hire a legal professional within their area for immediate assistance. For instance, if they’ve filed for bankruptcy in Florida, a Florida Chapter 7 bankruptcy lawyer can help them with filing and understanding the state’s regulations regarding their qualifications to protect their vacation home from the said proceeding.
Determining Whether It’s Possible to Save a Vacation Home
If a homeowner wants to determine if they can save both a primary and secondary residence with Chapter 7 bankruptcy protection, it’s important to acquire recent property appraisals or sales analyses that compare both properties. From there, homeowners can subtract the properties’ balances of liens and loans. In some cases, it may help to consult with a property tax lawyer to assist with calculations of what’s owed for both properties.
After calculating the equity of the vacation home, the assigned trustee will then need to figure out whether it’s best to sell the home. The main determinant here will be the amount of money left over after subtracting the costs of selling the home, the exemption, liens associated with the property, and the trustee’s commission. Generally, the trustee will most likely want to sell the vacation home if it brings in enough money to sufficiently pay back creditors.
Understanding State Rules May Help Save Vacation Homes
Ultimately, the types of exemptions that homeowners can use to protect their vacation homes from bankruptcy will depend on the state. Oftentimes, it’s in homeowners’ best interests to work with a bankruptcy lawyer to help navigate the process. Otherwise, homeowners who are inexperienced with bankruptcy and don’t know what their specific state allows could wind up losing their vacation home. By taking the right steps, homeowners may have the chance to keep both their primary and secondary residences. Lastly, having a bankruptcy lawyer by their side to handle the proceeding seamlessly made it possible to protect their vacation home.