Can You Keep Your Home After Filing for Bankruptcy in Connecticut?

Filing for bankruptcy can be a daunting experience, particularly when it comes to understanding the implications for your home. In Connecticut, many homeowners are concerned about whether they can retain their property after filing for bankruptcy. The answer largely depends on the type of bankruptcy filed and the homeowner's financial situation.

When in financial distress, individuals can choose between two main types of bankruptcy: Chapter 7 and Chapter 13. Each has different impacts on homeownership.

Chapter 7 Bankruptcy: This type of bankruptcy is designed for individuals with limited income who need to eliminate unsecured debts, such as credit card debt and medical bills. In Connecticut, homeowners may be able to keep their homes through a legal provision known as the homestead exemption. This exemption allows individuals to protect a portion of their real estate value from creditors. As of the latest update, Connecticut's homestead exemption allows individuals to protect up to $75,000 in equity for their primary residence, and up to $125,000 if they are disabled or 62 years of age or older.

If the equity in your home is below the exemption limit, you likely can keep your home after filing for Chapter 7 bankruptcy. However, if your equity exceeds the exemption, the bankruptcy trustee may sell your home to pay off creditors. It’s important to consult with a bankruptcy attorney to evaluate your specific situation.

Chapter 13 Bankruptcy: This type of bankruptcy, often called a "reorganization" bankruptcy, is suitable for individuals who have a regular income and want to retain their assets, including their home. When you file for Chapter 13, you propose a repayment plan to make installments to creditors over three to five years. During this time, your mortgage lender cannot initiate foreclosure proceedings as long as you stick to the repayment plan. Chapter 13 allows homeowners to catch up on any missed mortgage payments while keeping the house.

Homeowners may find Chapter 13 favorable as it not only allows them to keep their home but also protects their equity from being liquidated. However, it’s essential to ensure that your repayment plan is financially feasible and that you can maintain your regular mortgage payments moving forward.

Consulting a Bankruptcy Attorney: Navigating bankruptcy can be complex, particularly regarding the protection of your home. It is crucial to work with a qualified bankruptcy attorney who understands Connecticut’s laws. They can provide personalized advice on how to proceed, help you understand the exemptions applicable to your situation, and guide you through the filing process.

In conclusion, whether you can keep your home after filing for bankruptcy in Connecticut depends on the type of bankruptcy you file, your home equity, and your repayment capabilities. Understanding your options and seeking professional advice can significantly influence your ability to protect your home during challenging financial times.