In part 4 of this five part series ‘5 steps to preventing foreclosure” were going to cover bankruptcy and
learn more about the ins and outs of this option to help Orange County homeowners determine if it’s the
right choice for them.
Will You Lose Your Home?
During the Chapter 7 bankruptcy process, the homeowner will typically lose their home when the trustee
sells it to pay off their unsecured creditors, although this is a common option, homeowners may actually
be able to keep their homes, with an option known as the homestead exemption, that enables the
homeowner to protect a portion of the equity in their home.
If the homeowner doesn’t have enough protected equity in their home under the homestead exemption,
the bankruptcy trustee can sell their home during the bankruptcy process.
Figuring Out the Homestead Exemption
Here’s how homeowners can figure out their non-exempt equity:
Step 1 – The homeowner must figure out the homestead exemption amount that they can claim. This
figure is typically up to $100,000 dollars.
Step 2 – Factor in what commission the trustee will make. The commission will be at least 25% on the
first $5,000 dollars, 10% on the preceding $50,000 dollars and 5% on the remaining balance which can
be up to $1 million dollars.
Step 3 – Determine the cost of sale. This amount is typically 8% of a home’s market value.
Step 4 – Total amount that’s owed on all mortgages on the home.
Step 5 – Total amount owed for tax liens or mortgage liens.
If the homeowner comes up with a number negative instead of a positive number, their home does not
have enough equity or incentive for the trustee to sell it in the bankruptcy because, there will not be any
money left over once the house is sold to pay off their unsecured creditors.
Get Legal Help Today
Every Orange County homeowner who is considering bankruptcy should seek out legal help and contact
a qualified bankruptcy attorney today. Bankruptcy is a viable option that may enable homeowners to
keep their homes and possibly buy another home within seven years or less if their home is sold