Can I Keep My Home, Car And Personal Belongings If I File For Bankruptcy?

Whether you can keep your home, car, and personal belongings when you file for bankruptcy largely depends on the type of bankruptcy you file (Chapter 7 or Chapter 13), the laws of your state, and your specific financial situation. Here’s a general overview:

Chapter 7 Bankruptcy

In Chapter 7 bankruptcy, also known as liquidation bankruptcy, a trustee is appointed to sell your non-exempt assets to pay off creditors. However, not all assets are sold:

• Exemptions: Both federal and state laws provide exemptions that protect certain assets up to a specific value, including equity in your home, car, and personal belongings. If your equity in these assets is less than the exemption limit, you can usually keep them.
• Home: Whether you can keep your home depends on the amount of equity you have in the property and your state’s homestead exemption. If your equity exceeds the exemption limit, the trustee may sell your home to pay creditors.
• Car: Similar to your home, whether you can keep your car depends on your equity in the vehicle and your state’s motor vehicle exemption. If the equity is below the exemption limit, you’re likely to keep your car.
• Personal Belongings: Personal belongings, such as clothing, household goods, and some types of jewelry, are typically protected under personal property exemptions.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, known as a wage earner’s plan, allows you to keep your assets and repay your debts over time (usually three to five years) through a repayment plan:

• Home: Chapter 13 bankruptcy can help you avoid foreclosure and keep your home. If you’re behind on mortgage payments, you can include the arrears in your repayment plan and catch up over the life of the plan, as long as you continue to make your current mortgage payments.
• Car: You can also keep your car in Chapter 13. If you owe more on your car loan than the car is worth, you might be able to “cram down” the loan to the car’s current value and potentially reduce your interest rate, lowering your payments.
• Personal Belongings: Since you’re repaying your debts in Chapter 13, you generally do not have to give up any personal belongings.

Important Considerations

• State vs. Federal Exemptions: Some states allow you to choose between state and federal bankruptcy exemptions, while others require you to use state exemptions. The exemptions you’re eligible to use will affect what property you can keep.
• Non-Exempt Assets: If you have non-exempt assets that you wish to keep, Chapter 13 bankruptcy may be a more suitable option.
• Reaffirmation Agreements: In some cases, you may be able to keep certain secured assets (like a car) by entering into a reaffirmation agreement with the creditor, agreeing to continue making payments to keep the property.

Deciding whether to file for bankruptcy and determining which chapter to file under are complex decisions that depend on your unique financial situation. Consulting with a bankruptcy attorney can provide you with advice tailored to your circumstances, helping you understand your options and the implications for your property.