What Happens To My Home Equity in Bankruptcy in Oklahoma?

Home Equity in Bankruptcy

In Oklahoma, home equity in bankruptcy is largely exempt form the creditors and the court. Homeowners considering bankruptcy often wonder whether having equity in their home will cause a problem with an Oklahoma bankruptcy filing. Its a good question given that in many other states the equity in your home is limited in the amount you can have. Oklahoma is one of the most favorable states in the union towards people filing chapter 7 or chapter 13 bankruptcy. Fortunately, the answer is that in Oklahoma your home is an exempt asset, but there are some details to know about.

Two Main Types Of Bankruptcy

There are two main types of personal bankruptcy used in Oklahoma, called Chapter 7 and Chapter 13. Chapter 7 is a fresh start bankruptcy. In a chapter 7 you keep most of your assets so long as they are exempt assets. The primary goal of Chapter 7 bankruptcy is to eliminate and forgive eligible debts. A discharge is a Federal Bankruptcy court order that forgives the person filing from personal liability for certain types of debts. This means that the debtor is no longer legally responsible to repay them. However, not all debts can be discharged. Debt not dischargeable includes, certain tax debts, student loans, child support, and alimony.

In chapter 13, home equity in bankruptcy is treated the same as in chapter 7. Chapter 13 is a financial reorganization, where you keep most of your assets and agree to a repayment plan to get all the debts resolved. In Chapter 13 bankruptcy, the debtor proposes a repayment plan to the court. In the plan the person filing outlines how they intend to repay their debts over a three to five-year period. The plan is based on the debtor’s income and expenses. Under the plan the debtor makes monthly payments to the bankruptcy trustee. A chapter 13 will usually reduce the total amount of unsecured debt owed by the debtor.

There are certain requirements for both bankruptcy types. Both types of filings have assets that are exempt from the process. In Oklahoma, one of the exemptions is for a homestead, meaning that the personal home of the person filing for bankruptcy will not be taken or sold to pay bills. The homeowner generally gets to keep it throughout the process if it is their primary residence.

Homestead Exemption In Oklahoma

An unlimited homestead exemption is one of the Oklahoma exemptions that cover property. This protects it from being drawn into a bankruptcy case to pay creditors. There is no limit on the monetary value or equity in the property so long as it is the primary dwelling of the person filing for bankruptcy. 

The homestead exemption covers a primary residence only. If you reside in your business that’s not zoned residential the exemption will not apply. The exemption is reduced dramatically if more than 25% of the property is used for business. The lot size will impact the exemption depending on where you live. If you live in a rural area your lot size and the exemption is larger.

Oklahoma Bankruptcy Exemption Requirements

You need to be a state resident to benefit from the Oklahoma bankruptcy exemptions. The rules require that you live in the state for at least 180 days to qualify to file for bankruptcy in the state’s courts. To take advantage of the homestead and other exemptions unique to Oklahoma, you must live in Oklahoma for two full years, at least 730 days, before you file for bankruptcy. If you haven’t lived in the state that long, you will use the exemptions of the state you lived in most recently.

Debt Reaffirmation

If you are still paying on a home mortgage, you may need to decide to keep that obligation in place as you go through bankruptcy. This is called a debt reaffirmation–an agreement that you owe money on the home mortgage and will continue to pay after your discharge in bankruptcy. There are some rules for these agreements in bankruptcy, including that:

  • The reaffirmation is a voluntary agreement
  • The remaining payment will not place too much of a burden on the debtor or household
  • The agreement to keep the property and pay for it must be in the debtor’s best interest

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Oklahoma Bankruptcy Attorneys in Your Corner

The bankruptcy process is a legal proceeding with strict requirements. Those include paperwork to be filed and evidence to be shown in court. A skilled Tulsa Okla. bankruptcy attorney from Kania Law Office will guide you through the bankruptcy process. Contact us for a no-cost consultation today. Call 918-743-2233 or contact us online to schedule an initial consultation.

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