It is often feared by people they will lose everything if they file for bankruptcy. Fearing the loss of their home, car, and other assets, many people are paralyzed and don't know what to do. The good news is that your home and car may be exempt. If your assets are exempt, then you will not have to give them up. More precisely, as long as your equity in a particular asset (home or car) is covered by your bankruptcy exemptions, you can keep it. Bankruptcy law allows you to keep all exempt property and most items that you obtain after your case is filed. Even if your home is not completely exempt, you can still keep it in a Chapter 13 case, as long as you pay its non-exempt value to your creditors in your Chapter 13 case. If you are married, you may have even greater exemptions, as some exemption laws allow more exempt property for married couples.
Non-Exemptions and Collateral to Creditors
While your car and home may be exempt, there are specific situations that may arise in the process that you should be aware of. If an inheritance, a property settlement or life insurance benefits are received within 180 days after you file bankruptcy, they may have to be paid to your creditors if not exempt.
It is also possible that some of your creditors have a "security interest" in your home, car or personal property. If you gave a creditor the mortgage on the property or put other property up as collateral for the debt, bankruptcy does not dissolve these security interests. If you are not making your payments to the creditor, then your creditor may be able to obtain an order allowing it to proceeding with a sale of your property notwithstanding the existence of your bankruptcy case. It is important if you put property up for collateral and wish to keep it, you make your payments to the creditor.
To Keep Collateral or Mortgaged Property Keep Making Full Payments
There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can make an agreement to continue making full payments on the debt until it is completely paid off. Another option is to pay the creditor the amount that the property is worth. To keep a non-exempt property, a debtor must generally pay the trustee an amount equal to the value of the non-exempt portion of the property.
To learn more about exempt vs. non-exempt property, visit our bankruptcy law and information center and look under the category of “Property You Keep.” To find out if your home, car or other personal items would be exempt in filing for bankruptcy, speak with an experienced attorney today.