Will I Lose My Home if I File for Bankruptcy? Due to some prevailing myths about filing for bankruptcy relief, many of my potential clients are under the impression that their home will automatically be sold if they file for bankruptcy. While it’s not impossible for this to happen, losing a home due to filing bankruptcy occurs much less often than some people would imagine for a few reasons, the most important of which is the Homestead exemption under North Carolina state law.
North Carolina residents can protect up to $35,000 of equity (value of home minus any outstanding liens on the property) in their residence using our state’s Homestead exemption. When a married couple owns the residence together and files jointly, the exemption amount doubles to $70,000. If the person filing does not need to use the entire $35,000 due to limited equity in their residence, $5,000 of the unused portion can be used as a “Wildcard” exemption to cover any of the person’s assets. Thus, whether a residence would be subject to liquidation in a Chapter 7 bankruptcy depends on how much equity the individual enjoys in the property.
For this reason, one topic of discussion in my initial consultations with potential clients is always whether the person owns their home and, if so, what is the total balance owed on the mortgage. If there’s too much equity to be covered using the Homestead exemption, filing for Chapter 13 relief (or not filing at all) may be the better alternative. These are things that we can discuss during an initial consultation. But please don’t allow myths about filing for bankruptcy to prevent you from looking into the option because it may be in your best interest to seek the relief you’re entitled to under the Bankruptcy Code. And depending on your circumstances, that relief can likely be obtained without the fear of losing one’s home. Call today to schedule an initial consultation so we can discuss options for dealing with your debt while ensuring that your most valuable asset is protected.
