April 01, 2016

Basics of Bankruptcy for Home Owners

Matt Hahne

Reprinted from the March/April 2016 News Briefs of the Group Legal Services Association.

A few months ago, a sweet elderly couple came into my office to discuss their options. They had fallen on hard times because the husband was forced to quit his full-time employment due to his health concerns. It was his full-time employment that kept them current on their debt payments. Now, with only Social Security income and no hope for additional income in the future, this couple was forced to consider bankruptcy. As we sat down and discussed their situation, things began to get very emotional. Husband was a proud man who worked hard every day until the age of 73. The last place he wanted to be was in my office. As he wiped the tears from his eyes, he began to talk about his home. He shared stories and wonderful memories about holidays, birthday parties and major life events that occurred in his home. Then, he looked up at me with tears running down his face and said, “How much longer do we have until we have to be out of the house?” He was under the impression that because they had substantial equity in their property, they were going to have to hand the keys to their home of 45 years over to a Bankruptcy Trustee. As we looked deeper into their situation, we discovered that their home was in both of their names as a married couple. They were entitled to what’s known as the Tenants by the Entirety exemption under Virginia law, which protects property owned by a married couple from individual creditors. Thus, all of their individual creditors could not attach to the equity in their property. They were able to file a bankruptcy and discharge all of their debt while keeping their home. Needless to say, this wonderful couple was beyond thrilled with this news.

It is stories like this that we see at Boleman Law Firm on a daily basis. Filing bankruptcy as a homeowner can have numerous consequences, both positive and negative. It is important to inform our clients of their options and allow them to make an informed decision. During my session on May 12th at the 2016 Annual GLSA Conference in Key West, FL, we will explore the different types of consumer bankruptcies and the effect each bankruptcy will have on homeownership. We will talk about the many options and benefits available to homeowners in a Chapter 13 reorganization case and how often a Chapter 13 can make the “dream home” affordable again. In addition, we will discuss the process of buying and selling real estate while in a bankruptcy, as well as the credit consequences of bankruptcy in relation to future home purchases after receiving a discharge in bankruptcy. I’m very much looking forward to presenting in Key West this year and I hope you will consider attending my session.

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Matt Hahne

Matt Hahne is a Group Legal Services Association member, Chair of the Newsletter Committee, and member of the Profiles project.