My Mobile Home in Bankruptcy: Will I Lose it in Chapter 7 or Chapter 13? Can I Surrender It if I Want To?
Mobile Home in Bankruptcy: Is It a Car or Is It a House?
A mobile home in bankruptcy, or a manufactured home, is treated the same way that all property is treated in bankruptcy: it is retained or surrendered (voluntarily), and it is protected from seizure & liquidation or it isn't. That is, it is either subject to liquidation in a Chapter 7 "liquidation" bankruptcy based upon its fair-market value, or it is not. It may be surrendered in either Chapter or a Chapter 13 bankruptcy if you no longer desire to retain the property and any mortgage or installment payment secured by the property. A mobile home in bankruptcy is not treated much differently than non-"mobile" or non-manufactured house in bankruptcy. The difference, as the name of this particular form of property implies, is that it is potentially mobile. And, therefore, the means by which the home is protected from liquidation by the Chapter 7 bankruptcy Trustee—whose job is to seize your personal assets and sell them off for the benefit of your creditors, who, otherwise, will largely receive nothing repaid on the debts you owe them—may vary slightly from the means used to protect "non-mobile" real estate. As explained below, the "exemptions" used to protect a piece of property are specific to different property types and protect different types Note that, in a Chapter 13 bankruptcy, which is essentially a 3-5 year payment plan in which your creditors are repaid some percentage of what you owe over the length of the payment plan, no property is seized and liquidated at all (although it may still be voluntarily surrendered).
Mobile Home in Bankruptcy: Liquidation of Assets in Chapter 7 Bankruptcy
In a bankruptcy filing, the question for any property is whether it is worth more in fair-market value terms than can be "protected" in the bankruptcy. This question is most urgently posed in a Chapter 7 bankruptcy, in which bankruptcy petitioners can actually have "unprotected" property seized and sold off by the Chapter 7 Trustee, as noted above. How property is "protected" in bankruptcy is through the application of the "exemptions" mentioned above to the property by your Michigan bankruptcy attorney in the drafting of your Chapter 7 or Chapter 13 petition. "Exemptions" are pieces of the Federal Bankruptcy Code statute which allow certain types of property to "exempted" or removed from the legal bankruptcy estate containing everything you own no matter where it is located that is automatically created by function of law upon the filing of your bankruptcy petition. If a piece of property, up to its full fair-market value, has been fully exempted, it is totally removed from the bankruptcy estate and may not be liquidated. The Chapter 7 bankruptcy trustee has only the power to liquidate property in the bankruptcy estate. The exemptions, again, protect different types of property to different dollar-value extents. Thus, whether you are attempting to protect a mobile home in bankruptcy with the automobile exemption or the homestead exemption based on a classification of the property as either a "vehicle" or a "home" makes a great deal of difference under the Federal bankruptcy exemptions. (Note that Michigan has its own separate set of exemptions as well, which your Michigan bankruptcy attorney may consider utilizing instead of the Federal exemptions depending upon the specifics of your particular assets. This article will reference the Federal exemptions only, for simplicity's sake.) Under the Federal exemption set, the automobile exemption currently permits an exemption of the equity value in an automobile up to $3,450.00. The "homestead" exemption, which is applicable to the home you actually reside in, allows exemption up to $21,625.00 in equity value. So it is plain to see that the homestead exemption will protect a lot more value in a mobile home in bankruptcy than the automobile exemption will be. However, the question of whether you actually live in the mobile or manufactured home is generally fairly easily answered, and there is rarely any struggle with a Chapter 7 trustee over the applicability of this exemption. However, where there has been controversy in this regard, questions regarding whether the home is affixed by way of a foundation to the land on which it sets, whether that land is rented, whether the home is truly mobile have been the subject of litigation in bankruptcy courts.
Mobile Home in Bankruptcy: Value is Key
Value, either way, is generally the only germane question with regard to the retention of a mobile or manufactured home in bankrutpcy. Mobile or manufactured homes generally depreciate in value rather than appreciate, however, and most Michigan Chapter 7 bankruptcy trustees are familiar with the actual fair-market value of a mobile or manufactured home. Thus, it is a rare mobile or manufactured home that cannot be fully exempted in Chapter 7 bankruptcy with the Federal homestead exemption. However, it is possible, and mobile or manufactured home-owners who wish to retain their property through a Chapter 7 will be asked by the experienced bankruptcy attorneys of The Hilla Law Firm, PLLC to provide detailed information regarding the specific features of the home in question (as their quality can vary widely, from simple hunting trailer to well-appointed and furnished double-wide with all modern conveniences). If the value of the home appears to push the limits of the available exemption, we may request a potential client to undertake a professional appraisal, although that is an additional expense that we request of Chapter 7 clients only when absolutely necessary.
Mobile Home in Bankruptcy: Chapter 13 May Be Preferable
If the property exceeds the value of the available exemption and you want to retain it, a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy will likely be preferable. In a Chapter 13 bankruptcy, which is essentially a 3-5 year payment plan in which your creditors are repaid some percentage of what you owe over the length of the payment plan, no property is seized and liquidated at all (although it may still be voluntarily surrendered). If you have non-exempt property or equity in property in a Chapter 13, it can affect the required amount of your monthly Chapter 13 plan payment—but no one will take your home from you. If you are a Michigan resident and are considering filing for bankruptcy, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.