Navigating Through Bankruptcy in Lexington KY and How It Can Affect Your Home

by Aug 28, 2022

As daunting as it may sound, it can actually be beneficial for you to file for bankruptcy. Here in Lexington, KY, bankruptcy laws have been created to protect people with overwhelming debt.

So, how can you get out of bankruptcy? And more importantly, how will bankruptcy affect your Lexington, KY home? Through this process, you can find ways to manage your debt while keeping ownership of your property.

Interested to learn more? We’ve compiled a quick list of FAQs to help you navigate bankruptcy and make the most out of your Lexington, KY home.

What happens when I file for bankruptcy in Lexington, KY?

Bankruptcy laws are rooted in the premise that homelessness benefits no one. People who have accumulated an overwhelming amount of debt should not have to lose their right to a home. By filing for bankruptcy, these people are granted by the court an “automatic stay” in their foreclosed homes.

What’s the difference between a Chapter 7 and a Chapter 13 bankruptcy?

Now that you’ve bought yourself some time, you can now focus on paying back your debt. There are two options for you and your choice will ultimately depend on these two factors: your assets in Lexington and your ability to pay. Here’s a rundown of the differences between a Chapter 7 and a Chapter 13 bankruptcy:

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Chapter 7

  • Any outstanding debt is discharged or deleted.
  • Property and assets will immediately be liquidated to pay for any debt.
  • Requires judicial approval to sell the house.
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Chapter 13

  • Any outstanding debt will be paid in three to five years.
  • A repayment plan will be presented to the bankruptcy court as a way to keep current assets.
  • Requires judicial approval to sell the house.

What will happen to my Lexington, KY house if I file for bankruptcy?

In contrast to the United Kingdom where the fate of your home rests on the hands of the official receiver, the future of your Lexington, KY property depends on the house itself. Factors such as equity, exemptions, and mortgage will dictate whether you’ll get to keep your home.

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Equity and homestead exemptions

Your home equity is basically the market value of your home minus what you owe. Moreover, the state of Kentucky has a homestead exemption to protect your equity. When you subtract the homestead exemption from your home equity, that will be the final equity that the bankruptcy court will consider.

In a Chapter 7 bankruptcy, you’ll get to keep your house if your equity after exemption is low. This is due to the fact that your property won’t be able to generate enough money to pay your debt.

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Mortgage

Despite being designed to let you keep your home, Chapter 13 bankruptcy is still dependent on your ability to pay your mortgage. Your new repayment plan has to include your monthly mortgage payments as well as your past due payments.

Is it worth it to keep my Lexington, KY house while bankrupt?

It’s perfectly understandable if you want to keep your Lexington, KY house. However, it’s also important to gauge whether this asset would become a liability.

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Chapter 13 bankruptcy

A majority of Chapter 13 bankruptcies end up failing due to the inability to follow through with the new payment plan. A big source of that burden often comes from the house’s mortgage.
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Chapter 7 bankruptcy

For a Chapter 7 bankruptcy, you would want to liquidate as much assets as you can to get out of debt. Furthermore, you would risk the possibility of foreclosure if you can’t manage your mortgage on top of your debt.

Need to learn more?

Think of bankruptcy as a way to get a fresh start. Let go of your property and get yourself out of debt fast by selling your Lexington, KY house. Just make sure to get the proper judicial approval!

No need to stress out about selling your house as well! Rylo Homes is the premiere cash home buyer in Lexington, KY and the answer to your problems. Pay off your debts without the month-long wait or the unnecessary fees and commissions.

Rylo Homes is the real estate solutions company that will buy your Lexington, KY with cash and close within a week! Just answer our form or give us a call so we can get your started on that fair cash offer!

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