Two of your most important possessions are your home and car. Its natural to be concerned about them when considering a bankruptcy. There are lots of ways to protect these assets but its not a guarantee that you’ll be able to keep them.
Its important to understand that some of your creditors may have a “security interest” in your home, car or other personal property (such as items purchased with a retailer credit card). This means that you put your property up as collateral for the loan (mortgage on your home, lien on the title to your car). A bankruptcy discharges your personal responsibility to pay the loan off. What remains, even in bankruptcy, is the lien that your creditor has on your assets. The lien secures the repayment obligation on the loan. The creditor is still entitled to take the property securing, sell it and keep the sale proceeds.
The good news is that in most cases you will not lose your home or car during your bankruptcy case provided three things happen. First, the equity in the property (fair market value less loan balance) must be fully exempt (see this article to understand exemptions). Secondly, even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors. Finally, if you want to keep the item, you must continue making payments on the loan. In a chapter 13 case, you can catch up on back payments over time and get current on the loan.
We understand the stress and sleepless nights that arise from difficult financial times. Our bankruptcy attorneys are ready to get you some relief and back on the path to good credit.
FLG Bankruptcy Attorney: Matthew Bole, Esquire