Many people worry that they will lose their homes or cars if they file bankruptcy. However, in most cases, this is not true and an individual who files bankruptcy will be able to keep his or her home and car. This is because state or federal exemptions can be used to protect a certain amount of equity that a person has in his or her car and home.
In a chapter 13 bankruptcy, a debtor may be able to keep secured property by paying the creditor the value of any equity he or she has in the property. A chapter 13 bankruptcy can even be used to stop a car repossession or home foreclosure by allowing a debtor to catch up on back payments and become current with the loan.
In a chapter 7 bankruptcy, people can also generally keep their homes and cars. However filing bankruptcy will not get rid of the security interest that a lender has in the property. This means that although a person’s legal obligation to repay the loan goes away after a bankruptcy, the lender can still take back the property if the person fails to continue making payments on the loan. A person who wants to keep his or her car or home after bankruptcy can keep the property by either signing a reaffirmation agreement with the lender, continuing to make voluntary payments on the loan, or by paying the lender the value of the property. The best option depends on the individual’s unique set of circumstances.
If you are considering filing bankruptcy and have questions about protecting your home or car, contact a local bankruptcy attorney for help.