What Property Can I Keep In Bankruptcy?
Filing for bankruptcy can be a stressful, confusing decision. Too often, people in your position, unable to pay their bills and dealing with collection calls, avoid filing because they are concerned they will lose their home, car or other household items. However, state and federal laws protect many types of property when you file bankruptcy. In addition, some types of bankruptcy do not put your property at risk at all.
Real Estate Exemptions
The federal government allows each state to determine property that is considered exempt from seizure in a bankruptcy proceeding. Under what is called a homestead exemption, a portion of the equity of your home is protected under a bankruptcy filing. The fact is that most people who file for bankruptcy have little to no equity in their home. As long as you can continue paying your mortgage and the equity in your home is less than your state’s homestead exemption, you may keep your home even if you file Chapter 7.
One of the biggest concerns when you file for bankruptcy is what will happen to your vehicle when you file. Exemptions also exist for vehicles under bankruptcy laws and they are similar to those for homes. If you currently owe $10,000 on your car and it is worth $12,000, you have $2,000 equity in your vehicle. In most states, that is low enough that it is protected from creditors. If you use your vehicle for work or have tools that you must have to conduct business, those are also normally exempt in bankruptcy filings as are many household items. Even if property is sold to pay your creditors, you are entitled to payment for the amount of the exemption. For example, if your car is actually worth $15,000 and is sold, you will receive payment for the $2,000 that was exempt.
Chapter 13 Bankruptcy
Property seizures only occur under Chapter 7 bankruptcy where the majority of your debt is cancelled. Chapter 13 bankruptcy allows you the option of paying the value of non-exempt property while also paying a reorganized amount to eliminate debt. A payment plan is arranged with significantly lowered interest rates and payments that allow you to pay your debts in three to five years. In some cases, creditors may also reduce the balance owed in order to help you pay the debt through the payment plan. This allows you to repay your creditors while keeping your property, even if it is non-exempt.
If you or a loved one are facing mounting debt and want to end the constant calls from creditors, bankruptcy may be the answer. Contact us today to learn what rights you may have and what type of bankruptcy you may qualify for. You can arrange a no obligation initial consultation by calling or completing the easy form online.