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About equity and bankruptcy

Q: Last week you said the equity of your home up to $50,000 per person ($100,000 for a married couple) is exempt in bankruptcy. How do I know how much equity I have in my home? A: Equity is the amount of money you have left if you sell your home and pay off your mortgage. Example No. 1 If your house is worth $100,000 and you owe $75,000 to the bank on your mortgage, you have $25,000 in equity. Example No. 2 If your house is worth $70,000 and you owe $75,000, then you have no equity. Example No. 3 If your house is worth $200,000 and you owe $75,000, then you have $125,000 in equity. Your house is worth what you can sell it for currently on the open market. This can be more or less than the assessed value (given by the town assessor), depending on the market for housing and the condition of your house. An independent real estate appraiser can look at comparable sales and tell you what your house is currently worth. Q: Can I keep my home if I file for Chapter 7 bankruptcy? A: It depends ... If you are behind on your mortgage payments to the bank, then they can still foreclose on your property. Bankruptcy can slow down the process, but eventually you will lose your home in foreclosure if you are behind in payments. However, if you will have enough money in the future to get caught up on your mortgage, Chapter 13 can allow you to keep your house. Or, if you have more than $50,000 in equity ($100,000 for a married couple) in your home, the bankruptcy trustee can take your house and sell it and pay off your debts from the money that exceeds the amount of the homestead exemption. However, if you are paid up on your mortgage and your equity does not exceed the amount of the homestead exemption, you can file for Chapter 7 bankruptcy and keep your house.

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