Will I Lose My Home Equity After Filing Bankruptcy in Oklahoma?

Filing for bankruptcy is a major step that carries with it many questions and concerns, one of the most common being whether you will lose the equity in your home. If you live in Oklahoma and are considering bankruptcy, it’s important to understand how your home equity is treated under the law.

Understanding Home Equity

First, let’s define what equity means in the context of your home. Equity is the difference between the value of your home and what you owe on any mortgages or liens against it. If your home is worth $200,000 and you owe $150,000 on your mortgage, then you have $50,000 in equity. This equity can be a significant asset and one that you naturally want to protect.

Types of Bankruptcy: Chapter 7 vs. Chapter 13

In Oklahoma, you have the option to file for either Chapter 7 or Chapter 13 bankruptcy, and the treatment of your home equity varies depending on which type you choose. By far the majority of cases filed are chapter 7. Chapter 7 is quick, easy and comprehensive.

Chapter 7 Bankruptcy: Liquidation

In a Chapter 7 bankruptcy (liquidation bankruptcy), there is an evaluation of your assets to determine if they can be sold to pay off your debts. But there are exemptions that protect certain assets, including some of the equity in your home. Oklahoma has its own set of exemptions that you can choose instead of federal exemptions, which often provide more favorable terms for keeping your home.

As of the current laws, Oklahoma allows you to exempt an unlimited amount of equity in your primary residence as long as it does not exceed one acre in a city or town or 160 acres on rural land. This means if your home falls within these limits and you file for Chapter 7, you can keep your home and protect your equity entirely, as long as your equity does not exceed these property size limits.

Chapter 13 Bankruptcy: Reorganization

Chapter 13 bankruptcy works differently. It’s a reorganization of your debts, where you make a plan to pay back creditors over a period of three to five years. In this type of bankruptcy, you do not sell your assets. Instead, you keep them and continue to make payments under a court-approved plan. This means that as long as you continue to make these payments, you can keep your home and protect your equity.

Federal Bankruptcy Exemptions

While Oklahoma allows you to use state exemptions, you also have the option to use federal bankruptcy exemptions instead. However, in most cases, the Oklahoma exemptions provide greater protection for your home equity. The federal system offers an exemption for home equity as well, but it is significantly less than Oklahoma’s exemption and is capped at a certain dollar amount, which may not fully cover high amounts of equity.

How to Protect Your Home Equity

To maximize your chances of protecting your home equity, it’s crucial to plan carefully before filing for bankruptcy. Here are some steps you can take:

• Understand the Exemptions: Make sure you understand both Oklahoma and federal exemptions. Knowing these can help you decide which set of exemptions to use to best protect your equity.
• Evaluate Your Equity: Have your home appraised to determine its current market value. This will help you understand how much equity you have and whether it falls under the exemption limit.
• Consult with a Bankruptcy Attorney: An attorney can provide guidance specific to your situation. They can help ensure that you are using the exemptions correctly.

Tulsa Oklahoma Bankruptcy Lawyer

If you’re facing bankruptcy in Oklahoma we can help you. If you are worried about losing your home equity, remember that both state and federal laws provide protections. Those protections are designed to help you retain your assets under certain conditions. By understanding the exemptions and choosing the right type of bankruptcy, you can increase your chances of protecting your home. Finally, consider consulting with a Kania Law Office bankruptcy lawyer to navigate this challenging process effectively. Reach out to Kania Law Office at (918) 743-2233 or online for a consultation.