Home Equity

Letter to “Ask Leon”

I have a home in my name but my niece and her husband’s names are on title. They, however, are not on my loan documents, just the Title. They pay 1/2 the mortgage every month and live in the house. I am thinking about filing bankruptcy. I went to a credit counselor and they said they couldn’t help me because on my income. If I file bankruptcy, is my house protected? I am current on my payments and we have equity in the home. Or, would I be forced to sell it to pay off the creditors? The market value is $190,000 and we owe approx $158,000.

Leon Says…

For the most part, it depends on where you live. The home equity you can keep when filing for bankruptcy varies from state to state. Another consideration is home value. For example, in California where I practice law, I have seen many people who filed, believing that California’s generous homestead exemptions were enough to protect their homes. Then they find out that the home is worth double what they thought, (or at least a lot more than they ever dreamed it could be) and they face having the bankruptcy trustee sell the house! There are two things you need to do immediately. First, get a good evaluation of your home’s current market value so that you will some objective guidance on this. It’s best to consult more than one source. The second thing is for you to go see an attorney specialist in bankruptcy for a consultation.