Law Office of Rick Morin, PC

I often consult with people that have waited far too long to declare bankruptcy in Sacramento. Unnecessary delays can be dangerous for a few reasons. But I want to focus on one reason that could cost you big money.

If you own a home in Sacramento, you are used to wild fluctuations in house values. Property can rapidly appreciate here — and most homeowners don’t complain about that fact. When it comes to filing for bankruptcy, a homeowner needs to pay special attention to the value of his or her house.

House values in Sacramento have come back to the point that many homeowners now have “equity” in their homes again. “Equity” is calculated by subtracting the total loans / liens on your house from the market value. So if your house is worth $300,000 on the market, but your mortgage balance is only $250,000, you would have $50,000 in “equity” in your house.

Home equity is an asset for bankruptcy purposes just like cash in the bank. You must exempt, or protect, this asset when you declare Chapter 7 bankruptcy. If you do not exempt your equity, or if the equity is more than the allowable exemption, the bankruptcy Trustee would have the ability to sell your house for the benefit of your creditors.

Because house prices are appreciating again in Sacramento, waiting too long to declare bankruptcy could result in you having too much equity in your house. If you don’t want the court to sell your house in a Chapter 7 bankruptcy, you would have to consider a Chapter 13 reorganization. In a Chapter 13, you will have to repay a portion of your debts over time. Even with too much equity in your home, everything will be protected in a Chapter 13 — but you do have to repay some debts as a result.

This is why I often tell people not to delay when considering declaring bankruptcy. A delay could price you out of a Chapter 7 bankruptcy, or it could result in an aggressive creditor seizing your assets.

The sooner you start the bankruptcy process, the sooner it will be over! Call my office if you have any questions about Chapter 7 or Chapter 13 bankruptcy in Sacramento. My number is (916) 333-2222.