Can I keep my home if I file for bankruptcy?

Debt can feel like a mountain on your shoulders, but you may worry that you will lose your home if you seek relief through bankruptcy.

Fortunately, bankruptcy is not meant to be a punishment but instead an opportunity to start new. Part of that means allowing you to keep the assets you need to make a successful fresh start.

Iowa allows you to claim many different exemptions when you file for Chapter 7, including your home, vehicle, pension plan and other property.

The homestead exemption

Among other assets, you may keep a single home and all its equity with no limit on the value. You will need to continue making payments on your mortgage. If your payments are unmanageable, you may determine that the best option for you is to surrender the property and discharge the remaining debt.

There are some limits that affect what you can claim when you file for bankruptcy. You are only eligible for up to one-half an acre of land in the city and 40 acres outside the city. Additionally, couples filing jointly may only claim the homestead exemption once.

Non-exempt property

Not all real estate is eligible for the homestead exemption. Second houses, farmland and rental properties are not typically exempt. Any equity in these properties will likely go to your creditors to relieve your debt.

Though you will likely keep your home during bankruptcy proceedings, you may still find the process overwhelming, but there are many resources and experts that can help you fully understand Chapter 7 and its limitations.