The purpose of declaring bankruptcy is to give yourself a chance to relieve the burdens of debt and to pay off creditors in an orderly manner as the means permit. In a bankruptcy, there are certain assets which are protected from creditors. Chief among these is your home.
Chapter 13 bankruptcy involves a plan detailing the method you will use to pay off your current and past-due debts. This plan covers a period of three to five years. Chapter 13 is a valuable tool because it allows you to keep your home and car, among other things, even if you are behind on payments. Your payments on these debts will usually be near your regular monthly amounts. If you are behind on loan payments, a Chapter 13 bankruptcy may allow you to make up these payments over time while holding on to your home.
A Chapter 13 bankruptcy can be filed at any time. As of this writing, the cost of filing for Chapter 13 is $185 in total.
In Gilbert, Arizona, you may claim a homestead exemption on your house, up to $100,000. This also applies to an apartment or mobile home that you occupy. Renters may claim an exemption toward any prepaid rent or security deposit up to $1,000 or 1.5 times your rent, whichever is less. This is claimed instead of the homestead exemption.
This exemption applies to the equity in your home, not to the home’s estimated value. If you have taken a $200,000 mortgage, and paid $70,000 in equity, your home would be protected. However, if you have non-exempt equity, under a Chapter 13 plan you will be required to pay off that amount on your home and any amount you’re behind on your loan. This can be done as part of the three-to-five year plan. It is mandatory to continue with the regular monthly payments.
There are also exemptions to protect your furniture, food, vehicle, and tools of a trade.
Your home utilities, such as electric and gas, will not be turned off because you filed for bankruptcy. The utility companies can require a deposit for future service, though, and you will have to pay any utility bills that come in after your bankruptcy has been filed.
Take note that this page is for informational use only and should not be considered legal advice. If you believe a bankruptcy might be in your future, consult an expert to receive current and correct information. Bankruptcy laws may vary from state to state.