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Housing is the largest monthly expense faced by the average American family. Mortgages and related home loans account for the vast majority of individual and familial debt. Because Arizona is a community property state, most property held by one of the spouses is considered part of the bankruptcy estate even if you don’t file a joint petition for bankruptcy. Those considering individual bankruptcy have likely fallen behind on their mortgage payments or are otherwise in danger of foreclosure.

Filing a petition for bankruptcy actually freezes all debt collection and/or foreclosure proceedings on your primary residence or any other property you own. This is called the “automatic stay” and is imposed by federal bankruptcy law. However, a stay of foreclosure proceedings is not permanent, and the bankruptcy judge must ultimately address whether you can keep your home. Many Arizona families are surprised to learn that this is not only possible with the help of an experienced Tucson bankruptcy lawyer, but that there are multiple options for keeping your home after bankruptcy.

Filing for Chapter 13 Individual Bankruptcy

There are two common types of individual bankruptcy in the United States: Chapter 7 and Chapter 13. Many working Americans qualify for Chapter 13 bankruptcy, which allows most petitioners to keep their homes even if they are behind on the mortgage. This “wage earners” bankruptcy can consolidate all payments on secured and unsecured debt into a single payment managed by the bankruptcy court. These debts can include:

  • Credit cards payments
  • Mortgage/lease
  • Car payments
  • Student loans
  • Medical bills
  • Tax liability
  • Utility bills
  • Advanced/payday loans
  • Personal loans

The overall debt is then restructured into an affordable three-to-five-year payment plan based on the petitioner’s income. If the petitioner makes all his/her payments on time, any debts remaining are discharged (forgiven) with the exception of the petitioner’s mortgage, student loans, certain taxes, and certain secured debts. Chapter 13 bankruptcy allows the petitioner to catch up on any late mortgage payments, stops foreclosure proceedings, and allows the debtor to start fresh. Those who successfully complete a Chapter 13 payment plan without future default get to keep their homes during and after bankruptcy.

Qualifying for the Homestead Exemption During Chapter 7 Bankruptcy

Chapter 13 bankruptcy is not the right solution for everyone. In this case, they have the option to file for Chapter 7 liquidation. Chapter 7 bankruptcy does not impose a payment plan on qualifying petitioners. Instead, a bankruptcy trustee gathers and liquidates (sells) all non-exempt assets, such as jewelry, property, savings, or investments, and creditors who filed a claim are paid in accordance with their priority. Most remaining unsecured debt is forgiven, and the petitioner starts fresh thereafter.

Chapter 7 bankruptcy petitioners in Arizona usually qualify for the Arizona homestead exemption. This allows the petitioner to retain up to $150,000 in home equity. Whether you can keep your home depends on what your home is worth, how much equity you have, and whether you’re up to date on mortgage payments. 

Save Your Home with the Help of an Experienced Tucson, Mesa, and Phoenix Debt Relief Lawyer

The surest way of saving your home is to work with an experienced Arizona debt relief attorney to negotiate with your lender before filing for bankruptcy. If this isn’t possible, bankruptcy attorney German Yusufov of Yusufov Law Firm can help you file for bankruptcy and take advantage of the homeowner protections afforded to Arizona petitioners. Call him today at (520) 745-4429 or contact him online for your free, comprehensive Arizona debt relief and bankruptcy consultation.